Why Houses in Japan Are So Cheap

To start with the obvious: Japan’s population has been decreasing year after year since 2011. In 2024 alone, the country saw a net loss of about 500,000 people, due to Japan’s consistently low birth rate. Projections estimate that by 2060, Japan’s population will be 30% smaller than it was at its peak. While immigration is quite strict compared to other western countries the number of foreign residents has nearly quadrupled since 2008 and Japan has slowly but continually loosened immigration rules.

What does this mean for the housing market? A massive surplus of housing with a few other issues cultural and governmental that help exacerbate the problem (Whether cheap housing is a problem or not depends on your perspective, i like to think affordable housing is a good thing)

In Japan, there’s a strong cultural preference for newness. People want the latest, this trend shows up in used car sales, where used cars sell for significantly less than other OECD countries. This preference plays out in real estate as well. New homes are valued far more than older ones, its extremely rare for Japanese National to buy these Akiyas (Abandon Homes).

Japan sits on the “Ring of Fire,” one of the most seismically active zones in the world. Around 20% of the world’s magnitude 6.0 or higher earthquakes occur in Japan. Because of that constant threat and other natural disaster-esq threats, there’s a deep-rooted belief that buildings, especially houses, are temporary and there’s a historic precedent for that. Every major earthquake brings the possibility of destruction and before the advent of earthquake standards the destruction was immense. So homes are treated as perishable goods.

This mindset creates a kind of vicious cycle: if everyone assumes their house will be torn down and rebuilt by the next owner anyway, why bother keeping up with certain costly maintenance? While interiors may be kept tidy and clean, exteriors are neglected. Houses aren’t repainted. Roofs aren’t upgraded. There's almost zero DIY culture like what you’d see in the US, where Home Depot and Lowe’s are neighborhood staples. In Japan, those kinds of big-box home improvement stores are rare. Homes are seen as depreciating assets, not long-term investments.

This philosophy shows up in Japan’s labor market. On a per capita basis, Japan has 3.8 times more architects than the United States, and construction-related employment makes up 2.1 times more of the population. That’s because the demand for new homes is extremely high.

As a western we see buying a home as an investment. Buying a house is historically considered the main way the middle class builds wealth. It’s often referred to as a “forced savings plan,” because as homeowners pay down their mortgage, they build equity in an asset that tends to appreciate over time. In Japan buying a home is seen as having a place to live, there is no equity to be gained and no investment to be made. While there are cities and prefectures that have seen appreciating values in the last few years, generally this is the mindset.

The result? A huge number of older, often abandoned homes scattered across both rural and urban areas. Many of these are listed on so-called “akiya banks”—local government-run platforms where vacant homes are sold for cheap, or even given away for free, in hopes of revitalizing dying towns.

Train crossing near Yoyogi park

Japanese zoning laws also play a major role in this. Some economic experts have described Japan’s zoning system as laissez-faire, thanks to its free market framework that prioritizes growth above all else. Unlike in many Western countries, there are no tight architectural restrictions, historic preservation mandates, or strict HOA-style oversight, growth is the priority, Japanese architects have far more freedom when it comes to aesthetics. Japan’s 12 zoning categories are based on maximum nuisance levels rather than strict use exclusions. That means residential buildings of various types, shapes, and sizes can be built in most zones, giving developers and homeowners far more flexibility in how they use the land.

I often see blogs about Japan real estate claiming that inheritance taxes also play a role in the Akiya Crises Japan is experiencing. The story goes like this, Young Japanese urbanites who have inherited rural family property abandon these homes in an effort to avoid paying inheritance tax. While Japan does have the highest inheritance tax rate globally, with the tax rate going as high as 55%, There is a basic exemption of anything 30 million Yen or under which is about 211,000 USD at the time of this writing. Most of these homes especially in rural towns are nowhere near 200,000 USD so I don’t see how inheritance tax would affect Japanese Natives decision making on these ultra cheap homes. Maybe there’s something else i’m missing.

When you combine these factors, declining population, cultural preferences, the view that homes are depreciating assets and lax zoning laws you get Japan’s current housing situation.

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