There’s a certain information lag that comes with media reporting on larger social phenomena. The whole akiya/vacant housing issue has become big news in Japan over the last decade, but it was a fact of Japanese life well before that. This blog, in fact, which began in 2009, was initially conceived as a means of explaining our belief that Japan would eventually have to face a surplus of housing due to its policy of building and selling new homes without any regard for existing and future housing stock. Akiya had been on the increase well before the media started paying attention, and just now the press is beginning to report on other effects of oversupply, but in the context of the demographic crisis, meaning depopulation.
A recent story in Gendai Business covered a bestseller by Masashi Kawai called Mirai no Nenpyo (Chronology of the Future), which puts into perspective how depopulation will affect the economy with respect to four fields: housing, medical care, local government, and public safety. In terms of housing, Kawai says the main immediate effect will be that houses will become difficult to sell, a situation that is already quite apparent in certain rural suburban areas of Japan. However, Kawai is not just talking about existing or used housing, which has been difficult to sell for a while now, but also new housing. That’s because the prime demographic for new house sales, people in their 30s with families, is shrinking in size so significantly. Statistics can be misleading. Overall, land value has increased in Japan, as well as the demand for new housing, but these two circumstances have been spurred by seniors with money to burn. They buy expensive condominiums in city centers as a means of reducing the inheritance tax burden for their heirs; or these high-end properties are being bought as investments because the buyers believe that real estate is the most stable place to park their money. Consequently, the market as a whole seems primed for growth, but it’s lopsided.
Tomorrow will bring what could be termed the 30-30-30 problem: In 30 years the number of people in their 30s—the prime demographic for new house sales—will have shrunk 30 percent compared to right now. This cohort is already marrying later in life than their parents did, which means if they do buy a home it might not be until they are in their 40s or even later. Right now, the common time frame for housing loans is 30 years, but as the home-buying layer of the population ages, the terms for most mortgages may shorten to 20-25 years, which means the people seeking these loans will likely be faced with higher interest rates and thus be looking for less expensive housing.
This trend would seem to bode well for people looking to sell their homes, since used housing will become more attractive to first home buyers who may not think they can afford new housing, but Kawai isn’t so sure. The number of vacant homes at the moment is enormous and increasing, and government solutions to the akiya problem can only do so much. The housing that will be desirable to these first-time home buyers will be desirable for the same reasons they’ve always been—size and access to public transportation. Used housing that is closer to train stations will be prioritized for renovation, but Kawai estimates that, at the moment, only about 500,000 akiya fit that description. Other akiya or even housing that will likely go on the market soon due to their owners’ aging situation, will still be difficult to unload unless the owners themselves have kept up their properties well, which is hardly guaranteed because home improvement is still a relatively rare thing in Japan.
Another problem Kawai mentions, and one that we’ve heard little about previously, is that Japan has essentially run out of “accessible” land for new housing. Developers are having to go further and wider to find land to build new houses, and with the population shrinking and concentrating in urban areas, fewer people will want to live in these places. In the end, he says, this changing housing situation will affect the other economic fields he discusses. Right now there is a shortage of doctors, but after the huge boomer cohort dies there will be a shortage of patients, and most of the available doctors and clinics will have already moved to cities where the boomers fled after retirement. The same goes for civil servants and public services. They will be concentrated in smaller areas, thus encouraging people to move to those areas. Public services will contract and businesses will have to adapt by also concentrating in places where those public services are available. Rural areas and far-flung suburbs will continue to die out, thus engendering a cycle of akiya creation that’s even shorter than it is now. Housing in these unwanted areas will be abandoned after less than a generation. As Kawai says, everybody has the “freedom to live where they want to live,” but when you consider society as a whole, consolidation and concentration is the only solution to the depopulation problem. Residential areas must be developed for “maximum convenience.” Otherwise they simply die.
Cat Foreheads & Rabbit Hutches 
Haven’t you reported in the past that condominiums often let their maintenance slip ? If so inner city housing will also degrade rapidly over time, possibly leading to abandonment there as well.
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In the past you have written about condominium owners neglecting long term maintenance of their apartment buildings. So it is not unlikely that the inner city homes will degrade and become gradually uninhabited over time ( say 30 years ) . The empty periphery is only what is happening now. The core may go like post war US cities as well.
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Hi,
Thanks for another interesting article.
Another important area that will accompany the aging and falling population of Japan will be the fall in the use of all forms of energy.
With the number households falling, areas becoming depopulated, and people getting older the amount of energy used in housing will fall. Less energy will be used for heating and cooling, lights, cooking, bathing, and laundry.
Concentration of housing will also mean less energy is used for transportation from the housing unit to other destinations as well. I would also guess that as people get older they also use cars less and ownership of cars will also fall as people age.
Japanese electric utilities may see a huge fall in electricity demand as the population ages and housing demand falls. Gasoline demand will also fall and with EV adoption increasing the need for service stations and oil refineries will also fall.
As Japan imports a huge amount of energy products of all types such as oil, coal, and natural gas this will affect the suppliers of those energy products such as Australia.
Fewer imports of energy products will also affect the Japanese trade figures as well and most likely result in a big positive impact allowing Japan to accumulate more wealth.
So these population changes will also have a major impact internationally as well.
Now contrast that scenario with what is going on in Australia. We have had huge population increases over the recent past (between 500,000 and 600,000 people over the past year), house and rental prices increases, kids hoping to get their hands on the parent’s houses ASAP, and energy prices that are much higher than Japan (especially for natural gas).
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i have rarely seen a drop in demand equated with an increase in wealth. Japan is predicted to have both a shrinking population and an aging population. As such its production is bound to fall and with it , its exports. Yes fewer people mean less imports but it will mean much less exports as well. Japan’s overall wealth stands a good chance of collapsing. Yes the older generation , just as in Australia , may do everything to hang on to their wealth but general prosperity is likely to fall.
A quick internet search gave Japanese electricity prices at about 30c per kWh and Australia at between 22c and 35c .
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Hi,
Well you know about the Internet….
We have numerous electricity plan rates across the country and rates vary even in cities.
We currently pay 47 cents for peak rate usage and 25 cents for off-peak per kwh. On top of that we have to pay a daily supply charge of $1.33 per day.
If you have solar panels you can offset some of the cost by using as much as possible during peak rate times as the price you get is only 6 cents per kwh of excess electricity fed into the grid.
The difference between the two prices of what you pay and what you get is made up of all other costs than generating costs.
During sunny days with moderate temps there is often more solar electricity being generated than the grid can use so rates for electricity can go negative, but retail customers never get that benefit.
So when adding the base electricity cost with the supply charge you get a pretty high cost per kwh,.
I think that the supply charge per month in Japan is quite low compared to Australia so when comparing the total cost per kwh Australia is more expensive.
Natural gas here in Victoria is more than ridiculous. The last time I calculated the cost for our residential gas without the daily supply charge was US$20 per 1000 cubic feet of gas. I haven’t calculated the new costs as it makes me sick to think how much more we are paying this year. IIRC the supply charge is around 90 cents per day.
Japan can increase its wealth even with a declining and aging population by changing its product output profile.
The huge reduction in energy import costs alone would allow more capital formation and savings which will more than likely offset all of the decline and still leave a positive impact.
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Merry Christmas and Happy New Year to to Catforehead.
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Thanks. Same to you.
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