Housing Insanity Japanese Style: Record Number of Vacant Homes in Japan, Abe Wants to Stimulate Home Building

Thanks to a rapidly aging population, record numbers of Japanese homes sit vacant according to the July 30, 2014 Asian Review report Vacant Homes in Japan Reach Record as Outlying Population Shrinks.

A record 13.5% of all homes in Japan were unoccupied as of last October, reflecting an exodus from outlying regions of the country and a general aversion to used homes.

Preliminary figures for a study on homes and land, conducted once every five years, were released on Tuesday by the Internal Affairs Ministry. The vacancy rate rose 0.4 percentage point from the previous survey. The number of empty homes grew by 630,000 to a record 8.2 million, and there were a record 60.63 million homes in all, an increase of 3.05 million.

Yamanashi Prefecture had the highest vacancy rate at 22%, largely due to a population outflow to Tokyo and other large cities. Nagano and Wakayama prefectures followed at 19.8% and 18.1%, with the four prefectures in Shikoku all at the 17% level.

The concept of renovating homes to make them last longer is not firmly established in Japan, according to a ministry official. Real estate companies do not actively handle used homes because they are considered to have lower value than new homes.

An outdated tax system meant to promote construction of residences on farmland during Japan's high-growth era decades ago has been another obstacle. Landowners that tear down homes would see their fixed-asset taxes for that land roughly quadruple because a tax break would no longer apply. This has prompted many landowners to leave unoccupied homes as is.

Holes in Abenomics’ Push for Housing

As is typical with Japanese economic absurdities, Abenomics is in the spotlight.

Flashback September 2013: Vacant Japan Homes Show Holes in Abenomics’ Push for Housing

Broken wood pieces dangle and sway like autumn leaves from the window frames of vacant homes in Inariyato, part of Yokosuka in the greater-Tokyo urban area, where taped-over mailbox slots tell a story of abandonment.

More than 50 houses and apartments, almost 20 percent of the quaint residential neighborhood of narrow streets and stairway paths leading into green hills, are empty here, an hour’s train ride south of Tokyo and 1,000 yards (900 meters) from the Yokosuka naval base, home of the U.S. Seventh Fleet. That hasn’t stopped developers from building at least eight new apartment blocks in the same city in the past two years.

Prime Minister Shinzo Abe’s plan to boost the economy in part by reviving the housing market and encouraging new home construction is in conflict with Japan’s demographics. Rural, suburban and less-desirable urban areas are becoming littered with empty homes as younger people moving to cities combines with one of the world’s fastest-aging populations. At the same time, tax breaks on mortgages favoring new-home purchases, recently extended to 2017 and increased to 50 million yen from 30 million yen, are spurring demand for new properties.

“Even when the number of vacant homes is on the rise, more and more new homes are being built,” said Hidetaka Yoneyama, a senior researcher at Fujitsu Research Institute in Tokyo who has written at least five books on Japan’s housing market. “That’s absurd.”

Absurdities

"That's Absurd" is a huge understatement, and not just for Japanese housing, but for Abenomics in general.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com