In Japan, the concept of impermanence is deeply rooted in the nation’s culture, as evidenced by the unique approach to housing. Unlike many other countries where homes are built to last for generations, houses in Japan are typically constructed to stand for a mere 30 years before being demolished and rebuilt. This practice is not only a reflection of cultural beliefs but also a pragmatic response to the ever-present threat of natural disasters.
One of the most striking examples of this transient mindset is the Ise Jingu, the most sacred shrine in the Shinto religion, which is Japan’s native belief system. Every 20 years, the shrine is meticulously dismantled and reconstructed using the same traditional techniques and materials, symbolizing the cyclical nature of life and the acceptance of change.
Japan’s short housing life spans can also be attributed to the country’s geological instability. Situated along the Pacific Ring of Fire, Japan is constantly at risk of devastating earthquakes and tsunamis. In response to this persistent threat, the nation has adopted a housing culture that prioritizes quick and inexpensive construction, primarily using wood. While this approach may not entirely mitigate the risks posed by natural disasters, it allows for more rapid rebuilding and recovery in the aftermath of such events.
Japan’s stable land prices are working in investors’ favour
Japan’s steady land prices are proving advantageous for investors, as the primary value of real estate lies in the land itself. Over the past few decades, land prices in Japan have remained remarkably stable, providing a solid foundation for investment. In contrast, the buildings erected on these lands gradually depreciate over time, eventually reaching a point where the seller is essentially only paying for the value of the land.
This unique dynamic in the Japanese real estate market has significant implications for both buyers and sellers. For investors, the stability of land prices offers a sense of security and predictability, as the underlying asset maintains its worth even as the structures upon it lose value. This characteristic of the market allows for more accurate long-term financial planning and risk assessment.
On the other hand, sellers must come to terms with the fact that the buildings they have constructed and maintained will eventually diminish in value, leaving only the land as the true source of worth. This realization may encourage property owners to prioritize land acquisition and development over the construction of elaborate or expensive structures, as the latter will inevitably depreciate over time.
The stability of land prices in Japan, coupled with the depreciating nature of buildings, has created a distinctive real estate landscape that rewards strategic investment and a keen understanding of the market’s long-term dynamics. As investors continue to navigate this environment, they may find that focusing on the intrinsic value of the land itself, rather than the short-term appeal of the structures above it, is the key to success in Japan’s real estate market.
The most valuable land in Japan is located in Tokyo’s central wards, inside the Yamanote Line loop. The first principle of real estate investment, ‘location, location, location,’ holds three times true for Japan. And with the ongoing economic upturn of Abe’s Japan, not only land but also condo prices have increased in central Tokyo over the last decade.
Time for a change: Longer-lasting structures and modern renovations
As Japan confronts the challenges of a new era, the nation’s long-standing approach to housing is undergoing a significant shift.
he demand for new condos and apartments has outpaced the supply, forcing younger generations to seek alternative solutions. Faced with financial constraints and a desire for more modern living spaces, many young Japanese are turning to the renovation of old homes as a cost-effective and practical option.
Traditionally, Japanese homes were designed with a highly compartmentalized layout, featuring numerous small rooms that no longer align with the preferences and lifestyles of contemporary buyers. Recognizing this change in demand, a growing number of construction companies are now offering renovation services to transform these outdated structures into modern, functional living spaces.
One notable example of this trend is the successful renovation of a condo in Akasaka by Housing Japan. The company skillfully remodeled the old, segmented layout into a luxurious and spacious residence that caters to the needs and aspirations of today’s Japanese homebuyers. This project showcases the potential for breathing new life into aging properties, extending their lifespan and adapting them to the evolving requirements of modern living.
As more young Japanese embrace the concept of home renovation, the country’s housing landscape is gradually shifting away from the traditional cycle of demolition and reconstruction. By revitalizing existing structures, Japan is not only addressing the immediate housing demand but also fostering a more sustainable and financially accessible approach to homeownership in the face of changing economic and social realities.
Also, construction quality, specifically seismic performance of buildings in Japan has significantly improved. Until a few decades ago, the Japanese way was to surrender to tsunamis and other natural disasters by using cheap building materials. Nowadays, modern engineering and SRC (steel-reinforced concrete) has made earthquake-proof high risers possible and extended the quality and lifetime of buildings.
Buying old or new luxury real estate in Tokyo: the most important criteria
The first criteria for investors should be the location and land price. Look at the history of land price development in the area you are interested in; Housing Japan can provide you with data from official sources. Central Tokyo is the most valuable land in Japan and is showing a long-term upwards trend.
In Japan, newer buildings always have a better resell value, as they are seen more favourably by Japanese buyers. This makes them a safer investment compared to older properties. They also have better renovation potential and are more likely to withstand the test of time for much longer than the once envisioned 30 years.
If you are interested in buying a second-hand home, it is generally recommended that it is a “Shintaishin Kijyun building” meaning that it received its Construction Completion Certificate after June 1st, 1981. Buildings certified after this date meet the stricter 1981 earthquake resistance standards. Another date to bear in mind is April 2000, when the Housing Quality Assurance Law (Product Quality Act) was enacted to improve the safety of wooden buildings. New indicators measuring the grade of deterioration were also introduced, thus making it easier to assess the condition of the property.
Working with an experienced agent in luxury investment properties
At Housing Japan, we specialise in buying, selling, and managing luxury real estate in central Tokyo. We have worked with investors around the globe and focus on central Tokyo properties as these promise stable returns, low vacancies, and the lowest longterm risks. We advise our clients to consider brand new developments or newer refurbished properties to match the demand for the Japanese as tenants or potential future buyers in a re-sale scenario. To learn more about our services and why this approach is the safest choice, contact our team for a personalised consultation.
