Japan will likely see an excess supply of 10 mn dwelling units in 2023, due partly to government housing policy through the 2000s that ignored falling demand caused by a shrinking population. The glut will further aggravate the problem of unoccupied homes, which topped 8.49 mn in 2018.
According to the internal affairs and communications ministry, Japan had a total of 62.41 million dwelling units as of 2018. Nomura Research Institute expects the number will increase to as many as 65.46 mn in 2023.
Meanwhile, the National Institute of Population and Social Security Research has forecast that the number of households will peak at 54.19 mn in 2023. Households have continued to increase despite a falling population because more people are living alone thanks to increased longevity and the rising number of unmarried people. But as the number of households stops growing, “The number of excess housing units could rise further to 20 mn or 30 mn,” said Ken Miura, a Professor at Kyoto University’s Graduate School of Engineering.
Japan suffered an acute housing shortage from the end of World War II through the 1960s, prompting the government to enact legislation to promote homebuilding. As a result, the shortage ended by 1973, but the construction of new houses continued at a pace of over one mn units a year through the 2000s.
Nomura Research Institute foresees a steep increase in the number of unoccupied homes after 2023, predicting it will hit 23.03 mn units in 2038 if the pace of house demolitions slows. The pace did accelerate from fiscal 2013 to 2017, but if it goes back to the 2008-2012 level, “the issue of housing surplus would really come to a head,” said Akira Daido.
The housing glut has been compounded by weak demand for existing homes. Older homes are less popular with homebuyers because many do not meet earthquake and energy-saving standards. One industry observer said this is the result of the government and the housing industry prioritizing quantity over quality.
There are two ways to reduce a housing surplus in a time of falling population. One is to boost demand for existing homes, but “it would not be easy to change the current market structure to one based on existing homes in Japan, where there is no tradition of appreciating and evaluating such homes, unlike in the US and Europe,” Miura said.
Still, elderly people and single-parent households often struggle to find homes, Miura said, and “if different sectors of the government such as housing and welfare learn to share information, existing homes can be put to more effective use.” The other solution is to promote the demolition of vacant houses. “The government needs to foster an industry that specialises in home demolition,” said Nomura’s Daido.
Taxes are another issue. The property tax often increases when a residential lot becomes vacant. “The government needs to offer tax and other incentives to property owners if it wants to promote the demolition of vacant homes,” said Osamu Nagashima, Chairman of Real Estate consultancy Sakurajimusho. Unless the government takes the lead in dealing with the housing surplus, the number of vacant homes that are just decaying away will only continue to grow.
