Chapter 2 — Why Japan, and why now

Nine million empty houses

In October 2023, Japan's Statistics Bureau counted 9,002,000 vacant homes — 13.8% of the entire housing stock. Both figures are the highest ever recorded. The count has risen at every survey since 1993, roughly doubling over those thirty years.

You will see the 13.8% figure quoted a great deal, and it is worth understanding what it contains before you build anything on it.

It includes flats sitting empty between tenants. It includes houses currently on the market. It includes holiday homes that are unoccupied most of the year by design. None of those is an abandoned house.

Strip them out and you get the number that actually describes the problem. Vacant homes excluding those for rent, for sale, or in secondary use stand at 3,856,000 — 5.9% of the housing stock, up 369,000 since 2018.

That is the phrase for a house nobody lives in, nobody is marketing, and nobody has a plan for.

Both numbers are true, and the honest way to use them is together. 13.8% is the headline. 5.9% is the opportunity. Roughly one house in seventeen in Japan is empty with nobody doing anything about it, and that is remarkable enough without inflating it.

This is the fact underneath everything else in this chapter. Japan has more housing than it has households, and the imbalance is growing.

Source: 令和5年住宅・土地統計調査, 住宅及び世帯に関する基本集計 (confirmed tabulation), Statistics Bureau, Ministry of Internal Affairs and Communications.

How the country got here

Three forces, all long-running.

Demographics. Japan's population peaked around 2008 and has fallen every year since. The decline is not evenly spread — Tokyo continues to grow while rural prefectures empty out — which is why national statistics tell you very little about any specific street.

A culture of rebuilding rather than renovating. For most of the post-war period, Japanese houses were built to be replaced rather than maintained. A wooden house is treated as having no residual value after roughly twenty-two years, which is the tax depreciation life, and market practice broadly follows it. The result is a country where a thirty-year-old house is often priced as if only the land existed.

This is the single most important structural fact for a foreign buyer, and Chapter 6 unpacks what it means in practice.

Inheritance. A house passes to children who already own homes in cities. Nobody wants to be the one to demolish the family home. Nobody wants to pay to maintain it. It sits.

Japan made inheritance registration compulsory in April 2024, partly to stop this pattern producing land whose owner cannot be identified.

What this means for prices

Two markets, moving in opposite directions.

Urban centres are not cheap and are not falling. Tokyo, central Osaka, central Kyoto and the desirable parts of Fukuoka and Sapporo have seen sustained price growth. Anyone arriving expecting to buy central Kyoto at a discount will be disappointed. Land prices in the commercial districts of these cities have risen year on year.

Everywhere else is a different market. Regional cities, small towns and rural areas contain enormous numbers of houses that are structurally sound, legally clean, and worth less than a used car. This is not a distressed-asset story — these are ordinary houses in places where fewer people want to live.

The gap between these two markets is the largest structural feature of Japanese property, and it is wider than in most developed countries. A two-hour train from central Tokyo can move you an order of magnitude in price.

The currency question

The yen has weakened substantially against most major currencies over recent years, which has made Japanese property meaningfully cheaper in dollar, euro, pound and Australian dollar terms.

We would encourage you to be careful with this reasoning.

Currency moves in both directions. A property bought at a favourable exchange rate and sold at an unfavourable one gives back the gain, and a fifteen-year holding period contains a lot of currency cycles. If your case for buying rests primarily on the exchange rate, you are making a currency trade with a house attached to it, and there are cheaper ways to trade currency.

The better way to think about it: the exchange rate affects your entry price and nothing else. Judge the property on what it is.

Tourism, and what it does and does not mean

Inbound tourism to Japan has recovered strongly and continues to grow, which has driven real demand for short-term rental accommodation, particularly in Kyoto, Tokyo and Osaka.

It has also driven a great deal of poor investment advice.

Short-term letting in Japan is legal but heavily regulated. The Private Lodging Business Act caps operation at 180 nights per year, and that is the national floor — municipalities layer their own restrictions on top. Kyoto's are among the strictest in the country, and a number of foreign buyers have purchased with a minpaku plan that turned out to be unworkable in that specific zone, on that specific street.

Chapter 11 covers this in detail. The summary: the tourism demand is real, and the regulatory position is much harder than the yield calculations circulating online suggest. Verify before you buy, not after.

Being honest about the risks

A chapter arguing that conditions are favourable owes you the other side.

Buildings depreciate here. Unless you are buying primarily for the land, expect the structure to lose value. Capital growth on a Japanese house is not the default assumption it is in Sydney or London.

Rural property may not be resellable. A house you buy for ¥3,000,000 in a village losing population may have no buyer at all when you want to exit. Cheap is not the same as good value.

Earthquakes are real. Japan's building standards are among the world's most rigorous, but they changed in 1981 and again in 2000. A house predating those revisions is legal and sellable and will perform differently.

Empty houses deteriorate quickly. Japanese summers are humid. An unoccupied, unventilated house develops problems faster than owners from drier climates expect. Chapter 11.

Management from abroad has real costs. Somebody has to hold keys, respond to problems, and file your tax return. Budget for it.

The honest summary

Japan is unusually open to foreign buyers, has an enormous surplus of housing outside its major cities, and offers full freehold ownership at prices that are, in many places, extraordinarily low by international standards.

It is also a market where buildings depreciate, rural property can be illiquid, and the regulatory detail matters enormously.

Neither of those observations is a reason to buy or not to buy. They are the shape of the thing you are considering. The rest of this book is about seeing that shape clearly enough to make your own decision.

Next: Chapter 3 — Visas. What the house does not give you.