[Financial Planning for the 100-Year Life] Japan's Vacant Houses: Are We Safe?

Changhee Kang, Representative of Truston Asset Management Pension Forum

Recently, I read a shocking book titled "Fudousan (負動産) Hell" written by Japanese economic and social issues commentator Makino Motohiro. Why is it called 負 (minus) dousan instead of 不動産 (real estate)? It is because homeowners or landowners, who dislike paying maintenance fees and taxes, try to sell their properties but cannot, to the extent that they have to pay others to take them away. Particularly noteworthy is the increasing number of vacant houses whose prices cannot be estimated.

The Japanese Ministry of Internal Affairs and Communications conducts and publishes a nationwide survey on vacant houses every five years. According to the survey conducted at the end of October 2018, the number of vacant houses in Japan was 8.48 million, accounting for 13.6% of all houses in Japan. The number of vacant houses is expected to have increased further in the survey conducted this October.

People usually think vacant houses are caused by population decline in rural areas or regional cities, but that is not the case. For example, Tama New Town, located 30 km from Tokyo, was a satellite city that experienced a new town boom in the 1970s and 1980s. However, nearly 50 years later, it has become a vacant house town where only elderly people remain or every other house is empty.

The biggest reason for the increase in vacant houses is population decline due to low birth rates and aging. Another major reason is that despite the increase in vacant houses, more than 800,000 new houses are built annually without measures to prevent the hollowing out of existing houses, as seen in Western developed countries. Other causes of increasing vacant houses include disagreements among heirs when the owner dies, and increased tax burdens when vacant houses are dismantled and held as vacant land.

The problem of old apartment complexes that cannot be rebuilt is also serious. In Japan, apartments are called condominium housing. To rebuild condominium housing, 80% of residents must agree, and to completely demolish it, 100% consent is required. However, obtaining such consent is nearly impossible. The background includes the economic feasibility of reconstruction, aging owners, and difficulties in reaching agreements among heirs when the apartment is inherited.

Apartments that cannot be rebuilt inevitably become slums and potential vacant houses. Old apartments also affect the surrounding land prices. According to data published by Professor Chihiro Shimizu of Nihon University, if the number of apartments built about 20 to 25 years ago increases by 1% in a region, the land price in that area decreases by about 4%.

Then, what is the situation of vacant houses in South Korea? According to data from the Korea Research Institute for Human Settlements, as of 2020, out of 18,430,500 houses nationwide, about 1,511,300 were vacant, accounting for 8.2%. Compared to 2015 (1,069,000 houses), this is an increase of a whopping 41%. Moreover, the speed of low birth rates and aging in Korea is faster than in Japan.

Vacant houses are also appearing in urban centers. When young people move from old downtown areas to newly developed towns, the population in the old downtown decreases. Many residents who remain in the old downtown are elderly or elderly single-person households. After they pass away, if heirs do not inherit the house, it often becomes vacant.

The problem of apartment slums is more concerning in South Korea than in Japan. The proportion of large-scale apartments built with reinforced concrete in Japan accounts for only about 10% of all houses. In contrast, apartments account for 63% of all houses in South Korea. Since many people want to live in apartments, this proportion is expected to increase further. Seeing high-rise apartments standing in fields while passing through regional cities, I worry about how much our grandchildren will struggle to deal with them 10 or 20 years from now.

Kang Changhee, Representative of Truston Asset Management Pension Forum

This content was produced with the assistance of AI translation services.