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Japan Shows the Way to Affordable Megacities (2014)

172 points by Osiris30 9y ago

pcurve 9y ago
"The median price for a home in Tokyo and its surrounding three prefectures is 28 million yen, or around $270,000." Just fyi, if you only include Tokyo, price nearly doubles. It doesn't make the best comparison because Tokyo + 3 prefecture = 38 million people with over 5000 square miles. However, that chart alone is very compelling because it shows something that you don't see anywhere else; declining housing price. Is centralized and lax housing regulations the main reason for this? I don't think the author makes a strong argument, but it's certainly a contributing reason.
- user5994461 9y ago
  >>> However, that chart alone is very compelling because it shows something that you don't see anywhere else; declining housing price. I find it strange that you would think that. I would expect accommodation prices to drop in the vast majority of areas. Obviously, I am biased the other way because of the places I know. The economy outside of major cities is pretty bad and it's only getting worse. P.S. There is also a matter of timespan. If you look at 20-30 years, everything is going up. If you look at 1-5 years, it's stable or going down.
  - ekianjo 9y ago
    In 20-30 years an accommodation loses about 50 to 60% of its value in Japan. The only thing that is stable or gaining any value in Japan is land. The rest is just a deprecating asset.
    - Dunan 9y ago
      This is why you buy a fully-depreciated ~40-year-old apartment or house. I spent my entire life's savings to do this and it was the best decision I ever made. When and if I leave Tokyo, I will rent it out for side income. I can't overstate the peace of mind this gives me.
      - ekianjo 9y ago
        What happens though when they decide to tear down the building? How much of the value do you recoup?
- Retric 9y ago
  That sounds bigger than it is. A circle with 40 mile radius ~= 5000miles. If you go a similar distance from NYC or DC etc the prices are still inflated because it's considered commuting distance, plus this is an average. For comparison the US median home price is ~220k. But, the Median price in Fairfax VA which is 30 miles from DC is $510,000. Chantilly VA which is ~35 miles from DC is 400k.
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  - timr 9y ago
    "That sounds bigger than it is?" Per Wikipedia, New York city's land area is 790km^2. Tokyo's is 2187km^2. Tokyo Metro's population density is 6,224/km^2 (I picked the higher of the possible numbers for this). New York City's density is 10,431/km^2. There's really no argument you can make that New York should be cheaper than Tokyo based on density alone. Tokyo's big secret is sprawl.
    - samsonradu 9y ago
      Right, Tokyo is very wide-spread. I believe it's the incredible infrastructure that allows people to commute to work easily. There is surprisingly little traffic for a city of that size. Leaving Tokyo for Kyoto by train I kept seeing apartment buildings and houses for the first 50km or so.
      - jackcosgrove 9y ago
        This sort of super sprawl is enabled by Japanese employers' promises of lifetime employment. You buy near where you work, and your job lasts as long as a mortgage. No need to buy in Mountain View because 20 employers are nearby.
    - Retric 9y ago
      NYC is limited by arbritraty state lines, if you look at the physical reality there is just as much sprawl it's just across state lines past Newark which is the same metro area with slightly different taxes and still has 11,654 people per square mile. Further people commute to the city's center which is why they tend to have lower population density than parts of their surrounding area. Which is why https://en.m.wikipedia.org/wiki/Guttenberg,_New_Jersey https://en.m.wikipedia.org/wiki/Guttenberg,_New_Jersey has twice NYC's population density even with shorter buildings.
- loudin 9y ago
  A huge part of lower home prices in Japan is that they treat housing as a depreciating asset in their economy. So it's more like buying a car than making an investment. http://freakonomics.com/2014/02/26/why-are-japanese-homes-disposable-full-transcript/ http://freakonomics.com/2014/02/26/why-are-japanese-homes-di...
  - sandworm101 9y ago
    That is an asian thing. Im seeing it with chinese buyers in Vancouver. They dont want a "used" house. New houses are being built to low standards on the assumption that any future buyer will rebuild anyway. Give me a 35yo house with a proven track record over some new thing that could be leaking come winter. Houses are not cars.
    - ghaff 9y ago
      And as that Freakonomics episode notes, there's at least an argument that disposable houses have been a factor in the Japanese economic slump. There are good reasons to rebuild housing from scratch (and some Japanese history that probably played into the disposable housing dynamic). But compared to the US, rebuilding housing every 35 years means that you're destroying a lot of capital.
      - sandworm101 9y ago
        Much depends on specifics. Any 35yo house will have been built to radically different codes. It will probably not be near the maximum square footage now allowed on its lot. So, purely from an investor's point of view, the house is holding back the price. Pulling it may actually makes the land worth more. In my neighbourhood it isnt easy to get a permit simply to replace a small house with a larger one .... unless something catastrophic happens and the old house is doomed. There have been too many leaky roofs left for years, and a few fires, which conveniently lead to the house being declared unliveable or unsafe, the first step to getting a new permit. In such situations the house is definitely worth more down than up.
- mc32 9y ago
  It also helps when houses are being depopulated because people are aging out of houses. There used to be an Australian guy who went around buying and fixing undervalued houses in Japan. While out in his searches, he'd point out the many unoccupied houses. As an aside, when is Japan going to reconsider how it calculates unemployment? As it is, their unemployment is like 3.7% yet many many younger people work for as temps, which is sort of counterintuitive for a very tight labor market.
  - mdorazio 9y ago
    And yet that's the same way the US calculates unemployment for U3 (the most commonly reported rate), leading to the same misrepresentation of the actual unemployment situation.
    - hudibras 9y ago
      U3 is standard precisely so that we can compare differences between countries. If people don't like what it's measuring, then they can certainly use one of the other metrics like U4, U5, or U6.
      - mdorazio 9y ago
        I don't have a problem with U3 at all. I have a problem with it being used as the de facto measure of employment health in the media when it tells only a small part of the story for average workers. You typically have to search for U6 yourself, while U3 is reported by the press every month.
        nradov 9y ago
        Yes if you want to be a well informed citizen you have to mostly ignore the mainstream media and actively seek out alternative sources. That shouldn't be a surprise to anyone here.
    - mc32 9y ago
      Then I guess labor dynamics are different, else why does one see people doing low value add jobs like pachinko, vending machine stuffers, McDonald's, people "directing traffic" when they could get more meaningful jobs (if the job market is so good, esp. Tokyo)
- ekianjo 9y ago
  > median price for a home in Tokyo and its surrounding three prefectures is 28 million yen For this price you get a shack in the far suburbs of Tokyo. Anything remotely close to the center goes to 100 million yen. And prices are going up before of the Olympic Bubble, too. It's completely crazy.
  - hudibras 9y ago
    Of course keeping in mind that a "far suburb of Tokyo" will still have a population of 400,000 or so, roughly comparable to the size of Miami or Oakland. Yokohama is definitely not Tokyo, but its population is 3.7 million, larger than Chicago and just a bit smaller than Los Angeles.
    - ekianjo 9y ago
      Agree with your point, but a bed town far away from the Tokyo center is still a bed town. Which not a very pleasant place to live in (99% residential, almost no stores, no restaurants around).
      - hudibras 9y ago
        Well, everybody's experience is different, I guess. But 99% residential and no stores or restaurants is bit hard to believe.
        ekianjo 9y ago
        What I mean is, nothing nearby enough. The zoning is clearly made to favor residential spaces in extremely high proportions, unlike an ordinary city center.
- hkmurakami 9y ago
  It's cultural. We believe housing is an investment. Not the case in Japan. That belief in the market drives the direction.
timr 9y ago
They buried the lede (presumably since it was inconvenient to the thesis of the piece): “Housing is seriously unaffordable in Tokyo-Yokohama, with a 4.4 Average Multiple (average house price divided by average household income). Osaka-Kobe-Kyoto has an Average Multiple of 3.5 and is thus rated as moderately unaffordable. Despite these ratings, Japan has the most affordable housing of any megacities (over 10,000,000 residents) in the Demographia Survey.” If you think real estate in Japan is "affordable", you need only talk to Japanese people. Salaries here are low, and the economy has been stagnant for decades. Younger people tend to live with their parents until marriage, and if you ask them why, they'll tell you: they can't afford to live on their own. Yes, Construction is rampant, but that's mostly because buildings here are ripped down every few decades, not because cities are necessarily building more or larger buildings. There's just tons of churn. I've said it before, and I'll say it again: if you want affordable cities, a big part of the "secret" is tanking your economy for a few decades.
- ska 9y ago
  And yet it is much more affordable than, say, San Francisco (9.2) or Vancouver (10.3) by that same metric, which was their point. By this metric at least, Tokyo fares far better than comparable cities - no lede buried.
  - deleted 9y ago
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  - timr 9y ago
    "By this metric at least, Tokyo fares far better than comparable cities - no lede buried." But to make that comparison fair, you need to control for a lot of important factors. I've named a couple of big ones. There are others (like land area - Tokyo is huge. SF and Vancouver are tiny and constrained by geography.) This article simply asserts that Tokyo is affordable (which, again, it is not), and that its "affordability" is due to construction. There's no real data here that supports that conclusion. It might be "relatively" more affordable than the frothiest global markets, but SF and Vancouver have been experiencing much higher population growth over the last decade, and SF in particular has been ground zero for a massive speculative bubble. The comparison is apples and oranges.
the_patrick 9y ago
I went to Tokyo this year and was shocked at how cheap it was compared to major North American cities. Meals like ramen were $8.00 USD including tax and tip. Asked some young people how much rent was in Tokyo, "very expensive, young people need their parents help... $1,000 USD per month". Sums it up there, much cheaper than the US and Canada but salaries are so low it's expensive for them. My take away is that Japan has a rep for being super expensive when in fact it's now very cheap for North Americans.
- chrisseaton 9y ago
  > Meals like ramen were $8.00 USD including tax and tip. I thought Japan was a non-tipping culture?
  - ue_ 9y ago
    Me too, I was advised by my host family in 2014 and 2015 not to tip, either. Though we may have all been wrong :)
  - cgarrigue 9y ago
    There is indeed not tip. But he was comparing with the prices in USA, where you need to include tipping.
- cgarrigue 9y ago
  It's only cheap if you come to Japan for holidays, or if you're an expat detached by your company to Japan. If you're living in the country, receiving the same salary as any Japanese person, Tokyo is an expensive city. And I'm not even talking about language teachers, who cannot really live in Tokyo or all the Japanese people who are part-timers Everywhere in the world salaries, rents and prices go hand in hand. Unless you're living on one side of a border and working on the other side (which is possible in EU) which allow you to game the system, rents and prices are based on supply and demand. Don't take it personally, but it does not make much sense to compare what you would get with a salary from one country while living in another country.
  - 9y ago
barking 9y ago
Sorry for being a bit OT but you may remember last year a boy was missing for several days in a remote forest region of Japan. I found that surprising, my prejudice of Japan had been that it was very heavily populated and urbanised but when I looked it up I discovered that it is an incredibly forested country with 70% of the country this way. Practically twice that of the USA.
- mc32 9y ago
  Their problem is arable land. It's mostly mountainous and practically inaccessible. They don't have munch in the way of large plains.
  - barking 9y ago
    But it's great for them to have such wildernesses. Western Europe is bereft by comparison and we've even cut down the trees on our mountains and put sheep and deer there to prevent them coming back.
- ghaff 9y ago
  >Practically twice that of the USA. That's a bit deceptive though because the US has huge tracts of wilderness land that aren't forested; they're deserts, tundra, plains, etc.
  - barking 9y ago
    That is true but even so it was the complete opposite of what I would have expected given Japan's large population and relatively small size.
bane 9y ago
When I was young I remember reading about "Tokyo, the city of $11 hot dogs"...this was when a normal hot dog in the states was a buck or two. I never really stopped to figure that maybe it was just foreign stuff that was crazy expensive. One of the really eye opening things I've learned in the last few years is how relatively affordable housing can be...even within the Tokyo city limits. https://www.youtube.com/watch?v=iGbC5j4pG9w https://www.youtube.com/watch?v=iGbC5j4pG9w -- older homes can be much much cheaper. Here's a $1600/mo house https://www.youtube.com/watch?v=As2XMhqNBx8 https://www.youtube.com/watch?v=As2XMhqNBx8 This needs to be considered against local incomes of course, so they're a bit less tempting to locals than to American foreigners from ultra expensive coastal cities. Part of this seems to be the particular Japanese combination of the shrinking and aging population + continued attempts at maintaining GDP via construction works + cultural preference for new living arrangements instead of old construction. But like anyplace, you pay for where you live and there are certainly incredibly expensive places to live. Outside of living arrangements, public transport, food, clothes, and so on...everything except for personal vehicles is relatively affordable on a foreigner's salary. However, salaries in Japan are surprisingly (sometimes shockingly low). I think I've heard that a person working in a regular "salaryman" job can expect to earn around their age * 10,000 USD. So if you're 30, you'll make around $30k USD. This information is a bit old, so expect it to be a little higher, but this table [1] from 2014 suggests a 32.4 year old computer programmer makes an average of 4,256,000 yen per year..or about $38k. Some occupations can make significantly more...but it's interesting to find yourself on this table and consider it. 1 - http://nbakki.hatenablog.com/entry/Annual_Salary_by_Occupation http://nbakki.hatenablog.com/entry/Annual_Salary_by_Occupati...
- chrischen 9y ago
  Japan is much more income equal than the US, so a proper comparison would be of average salary. In the US a Google engineer can be making $160k while a teacher in some southern state could be making $50k.
  - TheAdamAndChe 9y ago
    Just so you know, it's worse than you think. Teachers in rural MO make ~$35k/yr.
criddell 9y ago
Maybe housing in Japan wouldn't be so expensive if they didn't keep knocking down perfectly good houses to build a new one. It seems like they throw away a lot of value.
- Inufu 9y ago
  Did you read the article? It's whole argument is that housing in Japan is much cheaper than other cities.
  - criddell 9y ago
    Relative to salaries, housing is expensive. This entire comment thread has several people making that same point.
  - cthalupa 9y ago
    Home ownership in Japan is not a permanent thing, however. You build a new house every 3 decades. This is going to drive the cost down during the time that you're paying for a house, sure - you use cheaper materials, everything is build with a short timeframe, etc. But if I buy a house here on a 30 year loan, at the end of the 30 years, I'm no longer paying that off. It's just property taxes and upkeep, etc. In Tokyo, at the end of those 30 years I'm building a new house. I don't ever stop. There's no point where I go "Yep, mortgage is paid off, I don't plan on ever moving, or if I do, I can sell this house for enough to pay for another house that I can just move in to." Any single month or year might be cheaper, but it still costs a lot more in the long run to perpetually be paying for your house.
    - Aeolun 9y ago
      Only people that buy the plot after someone else moves out build a new house. It generally retains the exact same house for the durations of someone's life there.
      - criddell 9y ago
        That may be true, but it's also true that the house isn't much of an asset. Houses in the US are a capital investment. In Japan, they are more like durable goods.
mcguire 9y ago
Keep in mind that Japan has had some economic...difficulties...in the last 30 years, following a massive asset bubble in the late '80s. https://en.m.wikipedia.org/wiki/Lost_Decade_%28Japan%29 https://en.m.wikipedia.org/wiki/Lost_Decade_%28Japan%29 "...Tokyo [...] is still growing at a rapid clip, despite the fact that Japan as a whole hit its population peak in 2008." This is probably not sustainable.
Street_Bounty 9y ago
Hopefully we don't need megacities in the future
rdl 9y ago
It seems like there should be an arbitrage opportunity here, doing some kind of development in Japan vs. the US. The problem is for hardware it seems to make more sense to go even farther to China (where all the manufacturing is, anyway).
jorblumesea 9y ago
Density. Most Americans and American cities refuse to increase density to the proper levels because there is a "suburbs" culture here. Everyone wants 2 car garage, large lawn etc. Living in an apartment for your entire life is looked down upon, especially if you have a family. We're still in the suburbs mindset as historically space has been extremely abundant.
- TheAdamAndChe 9y ago
  I'm a young person, and to me it's more of an inequality problem than anything. Only poor people live in apartments, meaning apartment complexes are poverty- and crime-riddled. Either that, or they are so expensive, it would be cheaper to get a house. At least in the suburbs with a mortgage, I am able to build equity. My experience is in a city that has not been positively affected by globalization. I know the housing market is quite different in the tech hubs of the country.
  - mjfl 9y ago
    I think if given the opportunity, most people would move to a place where they have a shorter commute, which is one of the most consistent indicators of life satisfaction, on par with having a happy marriage. The problem is that you can only afford to live in a city if you are poor enough to be subsidized or rich enough to afford to subsidize everyone else. The middle gets cut out.
    - brut 9y ago
      Maybe there's a way to get the best of both worlds? High density with space? I don't know much about civil engineering, architecture and urban planning but I'm absolutely certain the the current state is just a local minimum, not an optimal solution. I'm pretty sure we could optimize for higher density, shorter commute and larger living spaces if we wanted to.
      - mjfl 9y ago
        You just need family-size non-luxury apartments to buy (and not rent). The only apartments of that size in any city that I know cost in the millions per unit. That's simply out of reach for your local dentist or pizza shop owner with a wife and 3 kids.
abalone 9y ago
This article from 2014 has problems. In 2016 Tokyo: "Existing condominium units’ average prices rose by 3.73%... New condominium units’ average prices skyrocketed by 21.2%..." "...last year was particularly bad for housing starts in Tokyo Metropolitan Area, with 9.9% less new condominiums (40,449 units) being put on the market – the lowest level since 2010..." [1] Basically the article has a politicized tone, comes from an urbanism advocacy group, ignores the recession, ignores Abenomics, misrepresents the true fluctuation of the real estate market in urban centers, jumps straight to "regulation" as the culprit, and is strikingly dismissive of environmental concerns. [1] https://www.globalpropertyguide.com/Asia/Japan/Price-History https://www.globalpropertyguide.com/Asia/Japan/Price-History
mberning 9y ago
It's a cultural thing. They do the same with cars. It is very common to find engines and transmissions with 60k km on them available for import into the US at bargain prices.
- VLM 9y ago
  I don't know about Japanese house inspection culture, but their car inspection system is designed to keep only new cars on the road. Essentially a stealth tax to discourage driving. So if your car fails inspection, which costs about $1000 just to attempt, you may as well part it out to Americans and buy another car... https://en.wikipedia.org/wiki/Motor-vehicle_inspection_(Japan) https://en.wikipedia.org/wiki/Motor-vehicle_inspection_(Japa... Its possible given that Japanese don't like used houses that something similar exists for purchase of a used house, perhaps an inspection that costs $25K would discourage used house purchases.
  - jackcosgrove 9y ago
    The inspection system would also seem to encourage more manufacturing, as a sort of legally enforced planned obsolescence.
acd 9y ago
The Japanese have low birthrate 1.42 per woman. https://upload.wikimedia.org/wikipedia/commons/thumb/5/55/Japan_Population_by_Age_1920-2010_with_Projection_to_2060.png/800px-Japan_Population_by_Age_1920-2010_with_Projection_to_2060.png https://upload.wikimedia.org/wikipedia/commons/thumb/5/55/Ja... The JCB japan central bank started money printing easy money by dumping interest rate after the last Japanese property bubble. https://en.m.wikipedia.org/wiki/Japanese_asset_price_bubble https://en.m.wikipedia.org/wiki/Japanese_asset_price_bubble House prices should be cheap as the population decreases but the house are already built.
- CydeWeys 9y ago
  Did you read the article? It says that the population of Tokyo has been growing (despite the country's population slightly decreasing), and also, the Japanese tend to prefer new construction.
contingencies 9y ago
The article attempts to claim that Japanese policymaking is somehow responsible for low prices. Correlation is not causation. For example one could posit that Japan is affordable precisely because nobody has any money, because their economy has been stagnant for two decades and against an aging population and reduced investment in critical technology such as industrial robotics it shows every sign of remaining so. Perhaps for many hope has left the building and with the absence of meaning life has become a rinse-and-repeat ritual of careful commuting.
woodandsteel 9y ago
Perhaps one of the reason rents are so low is the economy of the country has been stagnant ever since its real estate bubble burst a few decades ago.
didip 9y ago
This guy documents his process of moving to Tokyo and buying a house there. Pretty insightful. https://www.youtube.com/watch?v=iGbC5j4pG9w https://www.youtube.com/watch?v=iGbC5j4pG9w
Razengan 9y ago
What never fails to amaze is how Tokyo, for being the world's most populous and largest city according to a number of metrics, is so clean and orderly, not to mention safe. Just watch any of the street tours and stroll-throughs on YouTube [0][1][2]. There is almost a serene quality despite the crowds, and so very far from the dystopian "cyberpunk" vision that we've been taught to expect from "megacities." [0] https://www.youtube.com/watch?v=RnTvMbeXtqw https://www.youtube.com/watch?v=RnTvMbeXtqw [1] https://www.youtube.com/watch?v=95GlwrqE44U https://www.youtube.com/watch?v=95GlwrqE44U [2] https://www.youtube.com/watch?v=Fy4GX-YbmmU https://www.youtube.com/watch?v=Fy4GX-YbmmU

172 points by Osiris30 9y ago

"The median price for a home in Tokyo and its surrounding three prefectures is 28 million yen, or around $270,000." Just fyi, if you only include Tokyo, price nearly doubles. It doesn't make the best comparison because Tokyo + 3 prefecture = 38 million people with over 5000 square miles. However, that chart alone is very compelling because it shows something that you don't see anywhere else; declining housing price. Is centralized and lax housing regulations the main reason for this? I don't think the author makes a strong argument, but it's certainly a contributing reason.

user5994461 9y ago
>>> However, that chart alone is very compelling because it shows something that you don't see anywhere else; declining housing price. I find it strange that you would think that. I would expect accommodation prices to drop in the vast majority of areas. Obviously, I am biased the other way because of the places I know. The economy outside of major cities is pretty bad and it's only getting worse. P.S. There is also a matter of timespan. If you look at 20-30 years, everything is going up. If you look at 1-5 years, it's stable or going down.
- ekianjo 9y ago
  In 20-30 years an accommodation loses about 50 to 60% of its value in Japan. The only thing that is stable or gaining any value in Japan is land. The rest is just a deprecating asset.
  - Dunan 9y ago
    This is why you buy a fully-depreciated ~40-year-old apartment or house. I spent my entire life's savings to do this and it was the best decision I ever made. When and if I leave Tokyo, I will rent it out for side income. I can't overstate the peace of mind this gives me.
    - ekianjo 9y ago
      What happens though when they decide to tear down the building? How much of the value do you recoup?
Retric 9y ago
That sounds bigger than it is. A circle with 40 mile radius ~= 5000miles. If you go a similar distance from NYC or DC etc the prices are still inflated because it's considered commuting distance, plus this is an average. For comparison the US median home price is ~220k. But, the Median price in Fairfax VA which is 30 miles from DC is $510,000. Chantilly VA which is ~35 miles from DC is 400k.
- deleted 9y ago
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- timr 9y ago
  "That sounds bigger than it is?" Per Wikipedia, New York city's land area is 790km^2. Tokyo's is 2187km^2. Tokyo Metro's population density is 6,224/km^2 (I picked the higher of the possible numbers for this). New York City's density is 10,431/km^2. There's really no argument you can make that New York should be cheaper than Tokyo based on density alone. Tokyo's big secret is sprawl.
  - samsonradu 9y ago
    Right, Tokyo is very wide-spread. I believe it's the incredible infrastructure that allows people to commute to work easily. There is surprisingly little traffic for a city of that size. Leaving Tokyo for Kyoto by train I kept seeing apartment buildings and houses for the first 50km or so.
    - jackcosgrove 9y ago
      This sort of super sprawl is enabled by Japanese employers' promises of lifetime employment. You buy near where you work, and your job lasts as long as a mortgage. No need to buy in Mountain View because 20 employers are nearby.
  - Retric 9y ago
    NYC is limited by arbritraty state lines, if you look at the physical reality there is just as much sprawl it's just across state lines past Newark which is the same metro area with slightly different taxes and still has 11,654 people per square mile. Further people commute to the city's center which is why they tend to have lower population density than parts of their surrounding area. Which is why https://en.m.wikipedia.org/wiki/Guttenberg,_New_Jersey https://en.m.wikipedia.org/wiki/Guttenberg,_New_Jersey has twice NYC's population density even with shorter buildings.
loudin 9y ago
A huge part of lower home prices in Japan is that they treat housing as a depreciating asset in their economy. So it's more like buying a car than making an investment. http://freakonomics.com/2014/02/26/why-are-japanese-homes-disposable-full-transcript/ http://freakonomics.com/2014/02/26/why-are-japanese-homes-di...
- sandworm101 9y ago
  That is an asian thing. Im seeing it with chinese buyers in Vancouver. They dont want a "used" house. New houses are being built to low standards on the assumption that any future buyer will rebuild anyway. Give me a 35yo house with a proven track record over some new thing that could be leaking come winter. Houses are not cars.
  - ghaff 9y ago
    And as that Freakonomics episode notes, there's at least an argument that disposable houses have been a factor in the Japanese economic slump. There are good reasons to rebuild housing from scratch (and some Japanese history that probably played into the disposable housing dynamic). But compared to the US, rebuilding housing every 35 years means that you're destroying a lot of capital.
    - sandworm101 9y ago
      Much depends on specifics. Any 35yo house will have been built to radically different codes. It will probably not be near the maximum square footage now allowed on its lot. So, purely from an investor's point of view, the house is holding back the price. Pulling it may actually makes the land worth more. In my neighbourhood it isnt easy to get a permit simply to replace a small house with a larger one .... unless something catastrophic happens and the old house is doomed. There have been too many leaky roofs left for years, and a few fires, which conveniently lead to the house being declared unliveable or unsafe, the first step to getting a new permit. In such situations the house is definitely worth more down than up.
mc32 9y ago
It also helps when houses are being depopulated because people are aging out of houses. There used to be an Australian guy who went around buying and fixing undervalued houses in Japan. While out in his searches, he'd point out the many unoccupied houses. As an aside, when is Japan going to reconsider how it calculates unemployment? As it is, their unemployment is like 3.7% yet many many younger people work for as temps, which is sort of counterintuitive for a very tight labor market.
- mdorazio 9y ago
  And yet that's the same way the US calculates unemployment for U3 (the most commonly reported rate), leading to the same misrepresentation of the actual unemployment situation.
  - hudibras 9y ago
    U3 is standard precisely so that we can compare differences between countries. If people don't like what it's measuring, then they can certainly use one of the other metrics like U4, U5, or U6.
    - mdorazio 9y ago
      I don't have a problem with U3 at all. I have a problem with it being used as the de facto measure of employment health in the media when it tells only a small part of the story for average workers. You typically have to search for U6 yourself, while U3 is reported by the press every month.
      - nradov 9y ago
        Yes if you want to be a well informed citizen you have to mostly ignore the mainstream media and actively seek out alternative sources. That shouldn't be a surprise to anyone here.
  - mc32 9y ago
    Then I guess labor dynamics are different, else why does one see people doing low value add jobs like pachinko, vending machine stuffers, McDonald's, people "directing traffic" when they could get more meaningful jobs (if the job market is so good, esp. Tokyo)
ekianjo 9y ago
> median price for a home in Tokyo and its surrounding three prefectures is 28 million yen For this price you get a shack in the far suburbs of Tokyo. Anything remotely close to the center goes to 100 million yen. And prices are going up before of the Olympic Bubble, too. It's completely crazy.
- hudibras 9y ago
  Of course keeping in mind that a "far suburb of Tokyo" will still have a population of 400,000 or so, roughly comparable to the size of Miami or Oakland. Yokohama is definitely not Tokyo, but its population is 3.7 million, larger than Chicago and just a bit smaller than Los Angeles.
  - ekianjo 9y ago
    Agree with your point, but a bed town far away from the Tokyo center is still a bed town. Which not a very pleasant place to live in (99% residential, almost no stores, no restaurants around).
    - hudibras 9y ago
      Well, everybody's experience is different, I guess. But 99% residential and no stores or restaurants is bit hard to believe.
      - ekianjo 9y ago
        What I mean is, nothing nearby enough. The zoning is clearly made to favor residential spaces in extremely high proportions, unlike an ordinary city center.
hkmurakami 9y ago
It's cultural. We believe housing is an investment. Not the case in Japan. That belief in the market drives the direction.

timr 9y ago

They buried the lede (presumably since it was inconvenient to the thesis of the piece): “Housing is seriously unaffordable in Tokyo-Yokohama, with a 4.4 Average Multiple (average house price divided by average household income). Osaka-Kobe-Kyoto has an Average Multiple of 3.5 and is thus rated as moderately unaffordable. Despite these ratings, Japan has the most affordable housing of any megacities (over 10,000,000 residents) in the Demographia Survey.” If you think real estate in Japan is "affordable", you need only talk to Japanese people. Salaries here are low, and the economy has been stagnant for decades. Younger people tend to live with their parents until marriage, and if you ask them why, they'll tell you: they can't afford to live on their own. Yes, Construction is rampant, but that's mostly because buildings here are ripped down every few decades, not because cities are necessarily building more or larger buildings. There's just tons of churn. I've said it before, and I'll say it again: if you want affordable cities, a big part of the "secret" is tanking your economy for a few decades.

ska 9y ago
And yet it is much more affordable than, say, San Francisco (9.2) or Vancouver (10.3) by that same metric, which was their point. By this metric at least, Tokyo fares far better than comparable cities - no lede buried.
- deleted 9y ago
  [deleted]
- timr 9y ago
  "By this metric at least, Tokyo fares far better than comparable cities - no lede buried." But to make that comparison fair, you need to control for a lot of important factors. I've named a couple of big ones. There are others (like land area - Tokyo is huge. SF and Vancouver are tiny and constrained by geography.) This article simply asserts that Tokyo is affordable (which, again, it is not), and that its "affordability" is due to construction. There's no real data here that supports that conclusion. It might be "relatively" more affordable than the frothiest global markets, but SF and Vancouver have been experiencing much higher population growth over the last decade, and SF in particular has been ground zero for a massive speculative bubble. The comparison is apples and oranges.

the_patrick 9y ago

I went to Tokyo this year and was shocked at how cheap it was compared to major North American cities. Meals like ramen were $8.00 USD including tax and tip. Asked some young people how much rent was in Tokyo, "very expensive, young people need their parents help... $1,000 USD per month". Sums it up there, much cheaper than the US and Canada but salaries are so low it's expensive for them. My take away is that Japan has a rep for being super expensive when in fact it's now very cheap for North Americans.

chrisseaton 9y ago
> Meals like ramen were $8.00 USD including tax and tip. I thought Japan was a non-tipping culture?
- ue_ 9y ago
  Me too, I was advised by my host family in 2014 and 2015 not to tip, either. Though we may have all been wrong :)
- cgarrigue 9y ago
  There is indeed not tip. But he was comparing with the prices in USA, where you need to include tipping.
cgarrigue 9y ago
It's only cheap if you come to Japan for holidays, or if you're an expat detached by your company to Japan. If you're living in the country, receiving the same salary as any Japanese person, Tokyo is an expensive city. And I'm not even talking about language teachers, who cannot really live in Tokyo or all the Japanese people who are part-timers Everywhere in the world salaries, rents and prices go hand in hand. Unless you're living on one side of a border and working on the other side (which is possible in EU) which allow you to game the system, rents and prices are based on supply and demand. Don't take it personally, but it does not make much sense to compare what you would get with a salary from one country while living in another country.
- 9y ago

barking 9y ago

Sorry for being a bit OT but you may remember last year a boy was missing for several days in a remote forest region of Japan. I found that surprising, my prejudice of Japan had been that it was very heavily populated and urbanised but when I looked it up I discovered that it is an incredibly forested country with 70% of the country this way. Practically twice that of the USA.

mc32 9y ago
Their problem is arable land. It's mostly mountainous and practically inaccessible. They don't have munch in the way of large plains.
- barking 9y ago
  But it's great for them to have such wildernesses. Western Europe is bereft by comparison and we've even cut down the trees on our mountains and put sheep and deer there to prevent them coming back.
ghaff 9y ago
>Practically twice that of the USA. That's a bit deceptive though because the US has huge tracts of wilderness land that aren't forested; they're deserts, tundra, plains, etc.
- barking 9y ago
  That is true but even so it was the complete opposite of what I would have expected given Japan's large population and relatively small size.

bane 9y ago

When I was young I remember reading about "Tokyo, the city of $11 hot dogs"...this was when a normal hot dog in the states was a buck or two. I never really stopped to figure that maybe it was just foreign stuff that was crazy expensive. One of the really eye opening things I've learned in the last few years is how relatively affordable housing can be...even within the Tokyo city limits. https://www.youtube.com/watch?v=iGbC5j4pG9w https://www.youtube.com/watch?v=iGbC5j4pG9w -- older homes can be much much cheaper. Here's a $1600/mo house https://www.youtube.com/watch?v=As2XMhqNBx8 https://www.youtube.com/watch?v=As2XMhqNBx8 This needs to be considered against local incomes of course, so they're a bit less tempting to locals than to American foreigners from ultra expensive coastal cities. Part of this seems to be the particular Japanese combination of the shrinking and aging population + continued attempts at maintaining GDP via construction works + cultural preference for new living arrangements instead of old construction. But like anyplace, you pay for where you live and there are certainly incredibly expensive places to live. Outside of living arrangements, public transport, food, clothes, and so on...everything except for personal vehicles is relatively affordable on a foreigner's salary. However, salaries in Japan are surprisingly (sometimes shockingly low). I think I've heard that a person working in a regular "salaryman" job can expect to earn around their age * 10,000 USD. So if you're 30, you'll make around $30k USD. This information is a bit old, so expect it to be a little higher, but this table [1] from 2014 suggests a 32.4 year old computer programmer makes an average of 4,256,000 yen per year..or about $38k. Some occupations can make significantly more...but it's interesting to find yourself on this table and consider it. 1 - http://nbakki.hatenablog.com/entry/Annual_Salary_by_Occupation http://nbakki.hatenablog.com/entry/Annual_Salary_by_Occupati...

chrischen 9y ago
Japan is much more income equal than the US, so a proper comparison would be of average salary. In the US a Google engineer can be making $160k while a teacher in some southern state could be making $50k.
- TheAdamAndChe 9y ago
  Just so you know, it's worse than you think. Teachers in rural MO make ~$35k/yr.

criddell 9y ago

Maybe housing in Japan wouldn't be so expensive if they didn't keep knocking down perfectly good houses to build a new one. It seems like they throw away a lot of value.

Inufu 9y ago
Did you read the article? It's whole argument is that housing in Japan is much cheaper than other cities.
- criddell 9y ago
  Relative to salaries, housing is expensive. This entire comment thread has several people making that same point.
- cthalupa 9y ago
  Home ownership in Japan is not a permanent thing, however. You build a new house every 3 decades. This is going to drive the cost down during the time that you're paying for a house, sure - you use cheaper materials, everything is build with a short timeframe, etc. But if I buy a house here on a 30 year loan, at the end of the 30 years, I'm no longer paying that off. It's just property taxes and upkeep, etc. In Tokyo, at the end of those 30 years I'm building a new house. I don't ever stop. There's no point where I go "Yep, mortgage is paid off, I don't plan on ever moving, or if I do, I can sell this house for enough to pay for another house that I can just move in to." Any single month or year might be cheaper, but it still costs a lot more in the long run to perpetually be paying for your house.
  - Aeolun 9y ago
    Only people that buy the plot after someone else moves out build a new house. It generally retains the exact same house for the durations of someone's life there.
    - criddell 9y ago
      That may be true, but it's also true that the house isn't much of an asset. Houses in the US are a capital investment. In Japan, they are more like durable goods.

mcguire 9y ago

Keep in mind that Japan has had some economic...difficulties...in the last 30 years, following a massive asset bubble in the late '80s. https://en.m.wikipedia.org/wiki/Lost_Decade_%28Japan%29 https://en.m.wikipedia.org/wiki/Lost_Decade_%28Japan%29 "...Tokyo [...] is still growing at a rapid clip, despite the fact that Japan as a whole hit its population peak in 2008." This is probably not sustainable.

Street_Bounty 9y ago

Hopefully we don't need megacities in the future

rdl 9y ago

It seems like there should be an arbitrage opportunity here, doing some kind of development in Japan vs. the US. The problem is for hardware it seems to make more sense to go even farther to China (where all the manufacturing is, anyway).

jorblumesea 9y ago

Density. Most Americans and American cities refuse to increase density to the proper levels because there is a "suburbs" culture here. Everyone wants 2 car garage, large lawn etc. Living in an apartment for your entire life is looked down upon, especially if you have a family. We're still in the suburbs mindset as historically space has been extremely abundant.

TheAdamAndChe 9y ago
I'm a young person, and to me it's more of an inequality problem than anything. Only poor people live in apartments, meaning apartment complexes are poverty- and crime-riddled. Either that, or they are so expensive, it would be cheaper to get a house. At least in the suburbs with a mortgage, I am able to build equity. My experience is in a city that has not been positively affected by globalization. I know the housing market is quite different in the tech hubs of the country.
- mjfl 9y ago
  I think if given the opportunity, most people would move to a place where they have a shorter commute, which is one of the most consistent indicators of life satisfaction, on par with having a happy marriage. The problem is that you can only afford to live in a city if you are poor enough to be subsidized or rich enough to afford to subsidize everyone else. The middle gets cut out.
  - brut 9y ago
    Maybe there's a way to get the best of both worlds? High density with space? I don't know much about civil engineering, architecture and urban planning but I'm absolutely certain the the current state is just a local minimum, not an optimal solution. I'm pretty sure we could optimize for higher density, shorter commute and larger living spaces if we wanted to.
    - mjfl 9y ago
      You just need family-size non-luxury apartments to buy (and not rent). The only apartments of that size in any city that I know cost in the millions per unit. That's simply out of reach for your local dentist or pizza shop owner with a wife and 3 kids.

abalone 9y ago

This article from 2014 has problems. In 2016 Tokyo: "Existing condominium units’ average prices rose by 3.73%... New condominium units’ average prices skyrocketed by 21.2%..." "...last year was particularly bad for housing starts in Tokyo Metropolitan Area, with 9.9% less new condominiums (40,449 units) being put on the market – the lowest level since 2010..." [1] Basically the article has a politicized tone, comes from an urbanism advocacy group, ignores the recession, ignores Abenomics, misrepresents the true fluctuation of the real estate market in urban centers, jumps straight to "regulation" as the culprit, and is strikingly dismissive of environmental concerns. [1] https://www.globalpropertyguide.com/Asia/Japan/Price-History https://www.globalpropertyguide.com/Asia/Japan/Price-History

mberning 9y ago

It's a cultural thing. They do the same with cars. It is very common to find engines and transmissions with 60k km on them available for import into the US at bargain prices.

VLM 9y ago
I don't know about Japanese house inspection culture, but their car inspection system is designed to keep only new cars on the road. Essentially a stealth tax to discourage driving. So if your car fails inspection, which costs about $1000 just to attempt, you may as well part it out to Americans and buy another car... https://en.wikipedia.org/wiki/Motor-vehicle_inspection_(Japan) https://en.wikipedia.org/wiki/Motor-vehicle_inspection_(Japa... Its possible given that Japanese don't like used houses that something similar exists for purchase of a used house, perhaps an inspection that costs $25K would discourage used house purchases.
- jackcosgrove 9y ago
  The inspection system would also seem to encourage more manufacturing, as a sort of legally enforced planned obsolescence.

acd 9y ago

The Japanese have low birthrate 1.42 per woman. https://upload.wikimedia.org/wikipedia/commons/thumb/5/55/Japan_Population_by_Age_1920-2010_with_Projection_to_2060.png/800px-Japan_Population_by_Age_1920-2010_with_Projection_to_2060.png https://upload.wikimedia.org/wikipedia/commons/thumb/5/55/Ja... The JCB japan central bank started money printing easy money by dumping interest rate after the last Japanese property bubble. https://en.m.wikipedia.org/wiki/Japanese_asset_price_bubble https://en.m.wikipedia.org/wiki/Japanese_asset_price_bubble House prices should be cheap as the population decreases but the house are already built.

CydeWeys 9y ago
Did you read the article? It says that the population of Tokyo has been growing (despite the country's population slightly decreasing), and also, the Japanese tend to prefer new construction.

contingencies 9y ago

The article attempts to claim that Japanese policymaking is somehow responsible for low prices. Correlation is not causation. For example one could posit that Japan is affordable precisely because nobody has any money, because their economy has been stagnant for two decades and against an aging population and reduced investment in critical technology such as industrial robotics it shows every sign of remaining so. Perhaps for many hope has left the building and with the absence of meaning life has become a rinse-and-repeat ritual of careful commuting.

woodandsteel 9y ago

Perhaps one of the reason rents are so low is the economy of the country has been stagnant ever since its real estate bubble burst a few decades ago.

didip 9y ago

This guy documents his process of moving to Tokyo and buying a house there. Pretty insightful. https://www.youtube.com/watch?v=iGbC5j4pG9w https://www.youtube.com/watch?v=iGbC5j4pG9w

Razengan 9y ago

What never fails to amaze is how Tokyo, for being the world's most populous and largest city according to a number of metrics, is so clean and orderly, not to mention safe. Just watch any of the street tours and stroll-throughs on YouTube [0][1][2]. There is almost a serene quality despite the crowds, and so very far from the dystopian "cyberpunk" vision that we've been taught to expect from "megacities." [0] https://www.youtube.com/watch?v=RnTvMbeXtqw https://www.youtube.com/watch?v=RnTvMbeXtqw [1] https://www.youtube.com/watch?v=95GlwrqE44U https://www.youtube.com/watch?v=95GlwrqE44U [2] https://www.youtube.com/watch?v=Fy4GX-YbmmU https://www.youtube.com/watch?v=Fy4GX-YbmmU