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> A good example is housing. I think housing is a bad example to use wrt Japan. Japan is one of the few markets in the world where, for the most part, only la

by gkanai 4y ago

> A good example is housing. I think housing is a bad example to use wrt Japan. Japan is one of the few markets in the world where, for the most part, only land has value. Buildings LOSE value over time. This is for multiple reasons but mostly due to ever-changing earthquake-related construction regulations such that it's almost always cheaper to rebuild from scratch than keep an edifice and retrofit to regulations. This is also why Japan has more architects than any other country- if buildings are not kept and are almost always destroyed after a 30 year mortgage, the owner can build whatever they want and not have to be concerned about resale value- so lots of unique residential architecture. Alastair Townsend first covered this in ArchDaily years ago and it went on to be covered extensively by NPR and other outlets. https://www.archdaily.com/450212/why-japan-is-crazy-about-housing https://www.archdaily.com/450212/why-japan-is-crazy-about-ho...

zurn 4y ago
Buildings lose value over time in most places. And in many places where they don't, including renovation investments in the picture results shows declining value.
- dr-detroit 4y ago
  [dead]
- imtringued 4y ago
  The only places where buildings go up in value is where the building has been grandfathered in and is no longer able to be built in accordance with modern zoning rules.
  - ryukafalz 4y ago
    Which is rather common in my experience. The town adjacent to the one I just moved to has a bunch of duplexes, but if you look at the current zoning it's all single-family-only. You couldn't build much of the town as it is today, which is a shame as it's very nice. As you might expect given this, the town has steadily lost population.
  - Tiktaalik 4y ago
    Existing buildings will go up in value in an environment where construction costs are rising and the cost of replacement is increasing.
- FranzFerdiNaN 4y ago
  Here in the Netherlands this is absolutely not true for houses. My house, despite no renovations done, has more than doubled in value over the past ten years. Housing shortages make sure that existing houses are definitely not losing value.
  - dbsmith83 4y ago
    But is that the value of the building, or the land that is increasing for yours? My home (building + land) value has gone up a ton due to the housing shortages in tech centers, but on the assessment, the building value has gone down, while the land value has shot up a lot.
freetime2 4y ago
I think this is becoming increasingly less common. I am seeing lots of 30+ year old homes for sale in my local market that have been renovated by the seller before putting it up for sale. Housing quality has improved significantly since the post-WW2 era, so there’s no need to tear down a 30-year old home anymore. Some new appliances, wallpaper, and flooring is enough to attract a buyer. Here’s an example of a listing of a 39 year old home where renovation is still in progress. They include product links to the new appliances they are installing now, and will update the listing once remodeling is completed. This is super common to see in used homes listings these days. https://suumo.jp/chukoikkodate/gumma/sc_takasaki/nc_71189001/ https://suumo.jp/chukoikkodate/gumma/sc_takasaki/nc_71189001... I do still see a lot of houses being torn down. But they are more like 50+ years old, and in such a state of disrepair that they are not worth saving.
- dsfyu404ed 4y ago
  >I think this is becoming increasingly less common. That should be the case. As regulations get stiffer and stiffer the amount of area under the "long tail" get smaller. Of course there's always people who want to screech about how more is needed but at some point the tail is so narrow that society just ignores them because the amortized cost per improvement is just so high it's a no-starter.
- KaoruAoiShiho 4y ago
  I wonder if japan has an architect industrial complex that would lobby to keep regulatory changes regular.
- zztop44 4y ago
  I agree. I just bought a 20 year old place and it’s still in fine condition (and freshly renovated). Im planning to live in it for a while but honestly I wouldn’t be surprised if so long as I renovate it before selling I can get basically the same as what I paid now in another 10 or 15 years.
  - InCityDreams 4y ago
    >I can get basically the same as what I paid now in another 10 or 15 years. Accounting for inflation, or without (even approximately)?
wodenokoto 4y ago
Buildings always lose value over time unless they have exceptional historical value. A small, new apartment next to the old, big apartment I live in is much more expensive than mine. And mine was considered high end when it was built.
- TheDong 4y ago
  Your claim is something different. You're claiming that _relative to newer buildings_, yours has lost value. The parent poster is claiming that _relative to the same building in the past_, prices go down in japan and up elsewhere. Would the apartment you live in now have cost more or less 5 or 10 years ago? That's really the thing the parent poster is talking about, and other newer constructions are unrelated to that point.
dr-detroit 4y ago
[dead]
onlyrealcuzzo 4y ago
> Buildings LOSE value over time. This is not unique to Japan. Buildings depreciate. You only notice it in Japan because general inflation has been close to 0% and sometimes negative. Also - people in Japan tend to spend much less money updating their home compared to the rest of "The West". If you're sinking 1% of the value of your home into updates annually - the home isn't going to depreciate as much as if you didn't.
pharmakom 4y ago
Buildings lose value in almost every market. It’s just that in western cities the land increases by so much more than the building decreases we don’t notice it.
- Tiktaalik 4y ago
  Yes, but there remain factors that cause the value of western building to rise in value even decades later (my 120 year old house is worth $90,000 and going up in value). For example as construction costs increase, replacement costs increase, which causes the value of an existing building to rise. This is apparently not the case, and for some odd reason (probably government and tax policy) a house absolutely goes to $0 in 25 years and stays there.
Tiktaalik 4y ago
It is very weird how houses depreciate very quickly in Japan. There is surely intentional government policy behind this, and this would have significant impacts on the broader housing environment. I recall reading at one point for example that the property transfer tax is lower for empty lots than it is for occupied lots. Another subtle housing policy that incentivizes people to tear down old houses. Much has been written about Japan's zoning impacting its housing prices and rents, but imo it's as likely that the various tax and housing policy that creates this incentive to tear down homes is as important of a factor in creating a housing market that looks very different from other rich nations.
- tamade 4y ago
  It's just a notional loss for tax purposes. Japan has generous depreciation loopholes, some of which was closed a few years ago.
Tangurena2 4y ago
In Japan, houses were treated as capital expenses. Other countries treat housing as capital assets. Things may have changed in Japan in the past two decades, but that's how things worked up into the late 90s/early 00s when I stopped studying all things Japanese. This financial treatment was why so many smaller/rural communities were turning into ghost towns.
tamade 4y ago
Not really. Japan isn't unique in how property is valued. Real estate values in market-based economies are set by the market. Cap rates in Japan are comparable to the US and other major markets. Assigning value to land or improvements is just accounting. Buildings in Japan (and elsewhere) "lose value" over time due to depreciation, not because only land has value. There are huge tax advantages to owning real estate vs other asset classes. For example, Japanese real estate owners take advantage of accelerated depreciation for wooden structures as a tax shield.

by gkanai 4y ago

zurn 4y ago

Buildings lose value over time in most places. And in many places where they don't, including renovation investments in the picture results shows declining value.

dr-detroit 4y ago
[dead]
imtringued 4y ago
The only places where buildings go up in value is where the building has been grandfathered in and is no longer able to be built in accordance with modern zoning rules.
- ryukafalz 4y ago
  Which is rather common in my experience. The town adjacent to the one I just moved to has a bunch of duplexes, but if you look at the current zoning it's all single-family-only. You couldn't build much of the town as it is today, which is a shame as it's very nice. As you might expect given this, the town has steadily lost population.
- Tiktaalik 4y ago
  Existing buildings will go up in value in an environment where construction costs are rising and the cost of replacement is increasing.
FranzFerdiNaN 4y ago
Here in the Netherlands this is absolutely not true for houses. My house, despite no renovations done, has more than doubled in value over the past ten years. Housing shortages make sure that existing houses are definitely not losing value.
- dbsmith83 4y ago
  But is that the value of the building, or the land that is increasing for yours? My home (building + land) value has gone up a ton due to the housing shortages in tech centers, but on the assessment, the building value has gone down, while the land value has shot up a lot.

freetime2 4y ago

I think this is becoming increasingly less common. I am seeing lots of 30+ year old homes for sale in my local market that have been renovated by the seller before putting it up for sale. Housing quality has improved significantly since the post-WW2 era, so there’s no need to tear down a 30-year old home anymore. Some new appliances, wallpaper, and flooring is enough to attract a buyer. Here’s an example of a listing of a 39 year old home where renovation is still in progress. They include product links to the new appliances they are installing now, and will update the listing once remodeling is completed. This is super common to see in used homes listings these days. https://suumo.jp/chukoikkodate/gumma/sc_takasaki/nc_71189001/ https://suumo.jp/chukoikkodate/gumma/sc_takasaki/nc_71189001... I do still see a lot of houses being torn down. But they are more like 50+ years old, and in such a state of disrepair that they are not worth saving.

dsfyu404ed 4y ago
>I think this is becoming increasingly less common. That should be the case. As regulations get stiffer and stiffer the amount of area under the "long tail" get smaller. Of course there's always people who want to screech about how more is needed but at some point the tail is so narrow that society just ignores them because the amortized cost per improvement is just so high it's a no-starter.
KaoruAoiShiho 4y ago
I wonder if japan has an architect industrial complex that would lobby to keep regulatory changes regular.
zztop44 4y ago
I agree. I just bought a 20 year old place and it’s still in fine condition (and freshly renovated). Im planning to live in it for a while but honestly I wouldn’t be surprised if so long as I renovate it before selling I can get basically the same as what I paid now in another 10 or 15 years.
- InCityDreams 4y ago
  >I can get basically the same as what I paid now in another 10 or 15 years. Accounting for inflation, or without (even approximately)?

wodenokoto 4y ago

Buildings always lose value over time unless they have exceptional historical value. A small, new apartment next to the old, big apartment I live in is much more expensive than mine. And mine was considered high end when it was built.

TheDong 4y ago
Your claim is something different. You're claiming that _relative to newer buildings_, yours has lost value. The parent poster is claiming that _relative to the same building in the past_, prices go down in japan and up elsewhere. Would the apartment you live in now have cost more or less 5 or 10 years ago? That's really the thing the parent poster is talking about, and other newer constructions are unrelated to that point.

dr-detroit 4y ago

[dead]

onlyrealcuzzo 4y ago

> Buildings LOSE value over time. This is not unique to Japan. Buildings depreciate. You only notice it in Japan because general inflation has been close to 0% and sometimes negative. Also - people in Japan tend to spend much less money updating their home compared to the rest of "The West". If you're sinking 1% of the value of your home into updates annually - the home isn't going to depreciate as much as if you didn't.

pharmakom 4y ago

Buildings lose value in almost every market. It’s just that in western cities the land increases by so much more than the building decreases we don’t notice it.

Tiktaalik 4y ago
Yes, but there remain factors that cause the value of western building to rise in value even decades later (my 120 year old house is worth $90,000 and going up in value). For example as construction costs increase, replacement costs increase, which causes the value of an existing building to rise. This is apparently not the case, and for some odd reason (probably government and tax policy) a house absolutely goes to $0 in 25 years and stays there.

Tiktaalik 4y ago

It is very weird how houses depreciate very quickly in Japan. There is surely intentional government policy behind this, and this would have significant impacts on the broader housing environment. I recall reading at one point for example that the property transfer tax is lower for empty lots than it is for occupied lots. Another subtle housing policy that incentivizes people to tear down old houses. Much has been written about Japan's zoning impacting its housing prices and rents, but imo it's as likely that the various tax and housing policy that creates this incentive to tear down homes is as important of a factor in creating a housing market that looks very different from other rich nations.

tamade 4y ago
It's just a notional loss for tax purposes. Japan has generous depreciation loopholes, some of which was closed a few years ago.

Tangurena2 4y ago

In Japan, houses were treated as capital expenses. Other countries treat housing as capital assets. Things may have changed in Japan in the past two decades, but that's how things worked up into the late 90s/early 00s when I stopped studying all things Japanese. This financial treatment was why so many smaller/rural communities were turning into ghost towns.

tamade 4y ago

Not really. Japan isn't unique in how property is valued. Real estate values in market-based economies are set by the market. Cap rates in Japan are comparable to the US and other major markets. Assigning value to land or improvements is just accounting. Buildings in Japan (and elsewhere) "lose value" over time due to depreciation, not because only land has value. There are huge tax advantages to owning real estate vs other asset classes. For example, Japanese real estate owners take advantage of accelerated depreciation for wooden structures as a tax shield.