In Japan, Home Prices Stay Flat

https://www.wsj.com/articles/what-housing-crisis-in-japan-home-prices-stay-flat-11554210002

by jseliger • 7 years ago

20 44 7 years ago

wsj.com

keeganjw2• 7 years ago

Anyone have a version of this not blocked by the paywall? Thanks.

stevenwoo• 7 years ago

For international comparison sake, this graph is useful. One has to select Japan to add it to the chart.

https://www.economist.com/graphic-detail/2016/03/31/global-h...

rjf72• 7 years ago

This [1] is arguably even more useful. It gives a perfect illustration of how to keep housing prices low. 1995 is a key moment. Japan has been going through nearly 3 decades now of something between recession and stagnation. Their GDP was higher in 1995 than it is today. For some contrast, the US GDP has nearly tripled since then.

This is also gross GDP and not GDP/capita. Japan at one point had a greater GDP/capita than even the US. Their plummeting fertility rate and aging population is just icing on all of these problems and one that, incidentally, also helps with housing problems. As some villages face the probability of just going extinct there's even widespread issues with homes simply ended up completely abandoned. For instance on one prefecture nearly 11% of all homes had been simply abandoned. [2]

But indeed all of these factors (along some other uniquely Japanese trends that others have hit on) are sure to result in low home prices. But again, this is nothing anybody would ever want to emulate.

[1] https://www.youtube.com/watch?v=wykaDgXoajc

[2] https://www.japantimes.co.jp/news/2015/05/16/national/social...

hikarudo• 7 years ago

Try selecting Brazil in the Economist link. Are houses there really that expensive?

haolez2• 7 years ago

The government started giving really cheap credit to low income families to be able to buy houses around 2008/2009.

What they achieve instead was a 10x variation in house prices. It backfired and now the only ones buying here are the ones willing to take huge debts that will last 30 years. It’s probably a bubble.

option• 7 years ago

what is the population growth in Japan, again? /s

shereadsthenews2• 7 years ago

Tokyo added more than ten percent to its population in the last 15 years. The reason housing is cheap there is because they have a policy of building it.

https://marketurbanismreport.com/tokyos-affordable-housing-s...

mlindner4• 7 years ago

No the reason housing is cheap is because housing is a depreciating asset because of poor construction quality.

akgerber5• 7 years ago

Housing was a significantly smaller proportion of family budgets in the US during 1900 and 1950 — two years in which the US had seen over 10% population growth in the preceding decade: https://www.theatlantic.com/business/archive/2012/04/how-ame... https://en.wikipedia.org/wiki/Demographic_history_of_the_Uni...

mlindner4• 7 years ago

This is a ridiculous article. The housing market in Japan is drastically different than the US. Notably most people don't live in nor buy used houses. When you buy a house it's with the intent to tear it down and build a new house.

The houses are built cheaply with minimal insulation and no internal air (every room is heated/cooled independently, if at all, often with gas burning heaters that emit the exhaust directly into the room). When the wind blows it blows through the building. Houses don't last more than a few decades and are torn down. Houses are depreciating assets in Japan, like cars.

Edit: Yes we need to deregulate and dezone housing laws, especially in major metropolitan areas in the US, however that's not what causes Japanese housing to be cheap. It's apples and oranges and different expectations among the populace on what a house even is.

toufka• 7 years ago

Not sure why this is downvoted - it’s accurate, if jaring to an Anerican’s ears.

anunes• 7 years ago

This is a ridiculous article.

It is ridiculous because it presents a reality different from the US? I found it quite interesting.

mlindner4• 7 years ago

It tries to make the claim that Japanese house building is for some reason superior when in reality its just shoddy construction turning an appreciating asset into a depreciating one. If the house value stays flat then that's unusual, they usually lose value over time.

bobthepanda3• 7 years ago

One underdiscussed factor when talking about housing prices in the US is that average house size has shot up over the decades. https://www.darrinqualman.com/house-size/

Housing is going to be more expensive if people are buying 2.5x more house.

ngngngng• 7 years ago

This is often what's missing in the discussions I see on facebook among people that have no knowledge of real estate. "My parents bought a house that they paid off in 5 years on his meager salary!" Well yeah, but it was half the size of your apartment, Susan.

This should absolutely be talked about more often.

akgerber5• 7 years ago

Where can I buy an affordable new 700-1200 square foot fee-simple townhouse on a small urban lot with no parking because I don't have a car? They're illegal to build in almost all American cities, but a huge component of Japan's housing stock.

akgerber5• 7 years ago

Zoning laws (minimum lot sizes, minimum setbacks, minimum parking requirements that are uneconomical to meet on a small lot, bans on 2- or 3-family houses, etc) have intentionally outlawed many smaller, more-affordable styles of houses since 1970, so new houses have gotten bigger.

papermill• 7 years ago

That's a good point. But a 2.5X increase in house sizes doesn't account for the 100X rise in house prices.

If a house cost $2000 in 1950, it probably costs $200K now. It can't all be due to increase in house size.

The biggest culprits probably are tax incentives for homeownership, increased population, zoning laws limiting housing development and international investment tied to citizenship attainment.

bobthepanda3• 7 years ago

It's worth noting that square footage is not the only metric that houses have increased by.

Houses have more amenities (e.g. central air). Houses have more volume via higher ceilings; 30 or 40 foot foyers were mostly for the unbelievably rich before McMansions. How big are lawns? The garage? And so on.

I don't think it's everything, but it's not insignificant.

rootusrootus• 7 years ago

Doesn't Japan also have a big problem with depreciating houses? I.e. everyone wants a brand new house, so the value of the structure drops rapidly and it gets torn down after a number of years and replaced?

bobthepanda3• 7 years ago

Is that a problem, or a different market mindset? Why is it considered good that housing is an investment basically guaranteed to shoot up in value and become unaffordable to young people? Housing is illiquid, it’s one of the last things people should probably be using as an investment; otherwise we get repeats of the foreclosure crisis as people rake out mortgages on their house to support their lifestyle.

bamboozled• 7 years ago

That and also older buildings are considered to be dangerous in major earthquakes as regulations improve demand for newer buildings increase. Japan is a safety first culture.

helen___keller5• 7 years ago

You are correct that houses are built cheap and torn down, but as a note houses in the states depreciate as well, just the construction tends to be more expensive so most homeowners prefer to refurbish a fixer-upper rather than replace it.

While culturally cherished in the states, our 100+ year old homes have tons of problems from insulation issues to lead contamination, bad electrical wiring, sometimes structural issues, and so on. We pour countless dollars into renovating and repairing over the lifespan of a property rather than into reconstructing and letting it degrade over 30-50 years. I would argue that this is better from an environmental perspective, but from a financial perspective it's not so clear.

kevin_thibedeau• 7 years ago

This ignores the fact that houses in Japan are treated as disposable property and not investment vehicles. Only the land has value. A 40 year old house is a liability.

dwighttk• 7 years ago

Japan’s population is shrinking, right?

didn’t read the article... no wsj subscription

helen___keller5• 7 years ago

Tokyo is still growing, but not for much longer. I think it's expected to begin shrinking by 2020

keeganjw2• 7 years ago

Houses in the country side are super abundant because so many young people moved to cities. But this article talks about housing Tokyo, where demand has been very strong over the last 20 years. They kept prices low by letting developers build lots of housing, densely. A lot of the housing policy is set by the central government and is more insulated from NIMBY complaints. Also, it's much more common for housing to be prefabbed in factories and assembled on site.

tasubotadas• 7 years ago

If only somebody could have known that fixing supply in the market, will also fix the prices.

https://www.vox.com/2016/8/8/12390048/san-francisco-housing-...

helen___keller5• 7 years ago

It's worth noting that home prices are often distorted from supply/demand due to speculation.

Still, there can be no doubt that Japan's approach to urban design (tightly packed walkable neighborhoods connected to urban centers by a web of transit) scales much better than the approach taken in the states. In the states people scream "we are full" as they sit in endless traffic in cities with an MSA population of maybe 5 million. Meanwhile the Tokyo metropolis, depending on how you measure its limits, can be considered between 10 to 30 million strong.

kurthr3• 7 years ago

And the Tokyo growth rate is 0! It was 2 Million people in 1900. It has been the same population for 10 years, and it's shrinking into 2020.

http://worldpopulationreview.com/world-cities/tokyo-populati...

If you want to work in Tokyo, you can take a 1-2hr train ride each way, like the locals do... or you (and your family) can live in a typical 600sq ft apartment.

I love Tokyo, riding the transit and walking around the streets, but be honest about what it is, how people live, and how it got that way. I also love my 12 min commute, back yard garden, and walkable neighborhood in a rapidly growing "metropolis" of 1 million that barely existed 50 years ago.

helen___keller5• 7 years ago

I also love my 12 min commute, back yard garden, and walkable neighborhood in a rapidly growing "metropolis" of 1 million that barely existed 50 years ago.

May I ask where you live? Sounds like a dream, but also sounds fairly disconnected from the urban reality that many people face. If the jobs for your industry are in a big coastal city, you'd need to be a multimillionaire for the lifestyle you're describing.

ezoe• 7 years ago

Japanese house typically can't be usable after 50 years. That's because of humidity, frequent typhoons, and earthquakes.

New building regulations will be introduced every time new anti-earthquake building tech was invented. So the old houses which doesn't satisfy these regulations will be devalued soon.

That's why nobody want to live in a old house. Or more like nobody can be able to live in a old house.

jeffbax• 7 years ago

https://marginalrevolution.com/marginalrevolution/2016/08/la...

https://marginalrevolution.com/marginalrevolution/2016/08/th...

In Japan, Home Prices Stay Flat

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