The Japanese housing depreciation dilemma.

While Japan shares many characteristics of the West – a democratic political system and capitalist economic system – one area that distinguishes Japan as an outlier is the attitude the Japanese have to their homes. For many of us, in addition to the stability it provides, home ownership has traditionally been front and centre in our plans for building wealth and planning retirement. In Japan, homes have a rapid depreciation cycle, virtually worthless after 25-30 years; in fact, a vacant plot would be more desirable than a plot with an existing dwelling, in most cases. Land holds value, but dwellings do not. 

How has this unique situation come about? 

Japan sits on or near the boundary of multiple tectonic plates, making it prone to earthquakes and other natural disasters. Given that the building techniques are constantly improving resilience to natural disasters, many existing homes fall outside the continually updated safety regulations and are not trusted by the Japanese public. Japan, therefore, has a minimal second-hand housing market. 

Exacerbating this predilection to view structures as temporary is the rebuilding effort after the Second World War. The quality of construction was poor in many cases, with little earthquake resilience and lacking features such as insulation. The practice of rebuilding every 30 years or so has lingered ever since.