Transcript
Speaker: Welcome to the Buying a House in Japan podcast. My name's Take. And I'm Joey. And we're two friends who just quit our corporate jobs and bought a cheap house in rural Japan. The goal of this podcast is to document the highs and lows of the process while informing you of every step you need to take in order for you to do it yourself too. We're by no means experts and we're doing this for the first time, but we hope this gives you a realistic expectation if you embark on this journey yourself and we hope you enjoy the show.
Speaker: All right, we're back. Today we're going to answer one of our most frequently asked questions. Why are houses in Japan so cheap? How are you doing, Joey? I'm doing good. Let's get into it. Yup. So today we outlined a couple reasons starting off the top one. There's a huge supply. Two, Japan's seen some economic stagnation. Three,
Speaker: changing demographics and population and where people are living. Four, it's considered depreciating asset. Five, Japanese people like new things. And lastly, the currency exchange rate is killer right now for the US dollar. The six main reasons why these properties are so cheap, but we'll start at the top with number one, supply. Joey, take it away.
Speaker: Yeah, so this is something that we heard on the news before going to Japan just recently, and you read about it in the newspaper kind of thing, but it really hits home when you were there, especially in the more rural city, like we were in in Beppu in Kyushu, just you're seeing abandoned homes left and right everywhere.
Speaker: Yep. I think we talked to the Nikkei Shimbun Japanese newspaper. One of the reporters gave us a stat by 2038, one in three houses in Japan will be abandoned or vacant. So that's 23 million houses. I also read Anton Japan's new book, Free Houses in Japan. And he dropped a stat that I think stuck with me. There's going to be one, there's an abandoned house for every person in New York City. I think it's a pretty, that's pretty crazy to think about.
Speaker: Yeah, and for everybody in New York, yeah, 8 .5 million people. Another thing that like stuck with me, I was eating yakisoba at some restaurant in Beppu and I was talking to the lady there that was cooking it for me and she was saying, oh, she was like, you think there's a lot of abandoned homes here? Like some of the towns around the airport in Beppu, she was like, you walk down the road, everything is abandoned.
Speaker: Yep. So I guess the biggest reason I'd say things are so cheap is there's just a huge supply and we'll go over some of the other things that compound onto that. The second reason Japan has seen some economic stagnation. I'm not an econ major or know too much about econ, but to my understanding, Japan's gone through
Speaker: What is referred to as a lost decade, so the past couple, actually it's been more than a couple of decades in which Japan's seen economic stagnation in which they've had banking crises, they've seen deflation, they've seen a bubble burst, especially with real estate and stock market, all of which have made the Japanese population a little wary of purchasing houses at this point.
Speaker: Econ major, Joey, any insights? Yeah. Yeah. Just a very slow GDP growth and maybe the last 20, 25 years in Japan relative to its peers in that sort of neighborhood of the North Pacific there. Although some people are bullish on Japan going forward though.
Speaker: Yep. Yeah. I think us especially, but it makes sense though, if you grew up in the nineties and you saw that, Hey, real estate was a really shaky investment. And we saw a little bit out in the US, but also got over it. But I'd say, yeah, a lot of people are just wary of buying.
Speaker: real estate as an asset, which I think leads to these really low prices. Yeah. And I feel like always like when there is slow economic growth, the rural communities get hit harder than urban centers and again, contributing to the exodus of young workers from rural communities to cities.
Speaker: Yep. Speaking of Exodus, our next reason is the decreasing population. And then most people want to move to larger cities. I think I don't have a stat on me now. Joey, take it away. I'll look up a quick stat. Cool. Yeah. Again, one, given slow economic growth, you're going to go where jobs are and there's more jobs in the cities. On top of that, thinking just about my friends here in New York, thinking about where they want to live. They live in, these are like New York lifers type people, right? They want to live in a metropolitan area.
Speaker: And I'm sure many young Japanese people feel the exact same way. They want to live in a cool city with nice amenities, good public transportation, jobs, nightlife, good restaurants, that kind of thing. People want to live in cities, especially young people. People are more focused on their careers as well. And the city life facilitates that to focus on your career and that type of lifestyle. Cities are fun. Rural communities, I spent a little bit of time in rural communities recently and
Speaker: thinking about moving back to a city again, a little microcosm in my own life of this effect. Good analogy. Yeah. Going back onto that economic stagnation, I think a lot of this previous generation has been like, hey, we need to earn money. And seeing the economic situation moving to cities is probably where the economic opportunities are. That combined with the declining population pulling up a stat here, Japan's population peaked in 2008 at 128 million ever since then. It's been going down steadily.
Speaker: Some of these graphs I'm looking at look like by 2065 it should be right around the under 90 million. So big concern again, one in 10 people in Japan are over the age of 80. So this is a big problem beyond real estate. But it explains, hey, this is why there's such a big supply and kind of why people want to get rid of their houses so quickly too.
Speaker: Yeah. So population decreasing, demographic changing are big ones of why these houses are getting cheaper. Next up, in Japan, houses are seen as depreciating assets by the government. Here in our house, for example, in Beppu, its value is worth zero in the eyes of the government while the land really holds the value. So contrary to some of the Western world where real estate is seen as an appreciating asset,
Speaker: it definitely is not seen that way in Japan. I think wooden houses depreciate over some 20 years while concrete houses depreciate over 30 years. So that's a big one, especially from a tax perspective and something I think has been drilled in the minds of the Japanese population. Yeah. And it does differ between the building concrete structures depreciate slower than wooden buildings. But even though our house was worth zero, there is still some value there, but a lot of these abandoned homes, you look at them and they
Speaker: You do get the sense that the value of them is quite low. Our floors were, were sinking in kind of things. So all these kind of make a perfect storm. The government sees these buildings as depreciating the asset from a tax perspective. And so do the population. Um, next thing, Japanese people love new things. I can attest my dad loves new things, loves new cars, wants new houses, even though I personally, I, maybe our generation's built a little differently. I like, I think there's a lot of beauty in the old stuff.
Speaker: I think there's a lot of character, but I just know for a fact, culturally, a lot of Japanese population love new things over older things. This is the most interesting one for me. Where do you think this... I don't know. I feel like this isn't so ingrained in us in growing up in Canada. I don't know. I was always living in older secondhand homes forever, and my parents always bought secondhand cars. I don't know.
Speaker: Yeah. I have a suspicion. Yeah. And Japan's gone through a lot of rebuilds post -World War II, whether it be fires, earthquakes, wars, things like that. So I think it's been ingrained a little bit in the Japanese culture that like that rebuild mentality, even 2011, I'm sure a lot of things had to be rebuilt after the earthquake that I think one, there's increasing technology in
Speaker: Like earthquake proofing and stuff like that, that I think a lot of people think, okay, we need to rebuild this house to withstand earthquakes or natural disasters. But two, I think just generationally, they've had to rebuild over and over again. So maybe that has, has ingrained in their mindset a little bit.
Speaker: Yeah, definitely the earthquake stuff is true. I mean, given the, all the earthquake repairs we had to do on our house and our houses was built in the seventies or something like that. That does make sense. I, though I do, I got a feeling there's something more. I'm not exactly sure what it is, but yeah, there is an overemphasis on buying new in Japan, whether it's car, whether it's a house. Yeah. I think another reason I read an Anton's book was like that renovation culture isn't really there.
Speaker: Like we're, I think what we're doing with our house of keeping the frame, but just renovating and making, updating it is not as common. It seems the cycle of just bulldozing and restarting from ground up is more, I don't know, again, culturally ingrained than like, Hey, let's fix up this old thing. So I think that's something he mentioned in his book that seems to be prevalent, but also coming back a little bit in this, in these past few years.
Speaker: Yeah. Which also means my dad was very happy with this when we live in Japan as a family. You can find all kinds of great stuff in the Gomi in the trash. Like people throw out good stuff. New York where people throw out good stuff because they don't have rooms in the room in their apartment. Yeah. You can find really good stuff. People are getting rid of for free next to new. Next or the last reason there's probably one more I'll actually add after that is the US dollar to Japanese yen exchange rate.
Speaker: At the time of speaking, it's one us dollar to 144 Japanese yen. The yen is actually rebounding. I think a couple of weeks ago is like one to one 50, but this is a historic low for the Japanese yen compared to the dollar. I think in our lifetime, Joey, this is probably the lowest it's gotten over the past 30, 33 years or so. Yep. It feels good on the US dollar side. We studied abroad about 10 years ago.
Speaker: it was like $1 to 75 or 78 yen or something like that.
Speaker: Yeah, we kind of, yeah, it was very nice the past two months when I was in Japan because I do feel like just the cost of living is lower and then you apply the exchange rate. And I was eating every day at restaurants, which I got very tired of, but it was surprisingly affordable. Yep. So I think this has made things seem more affordable to foreigners, which is great. So I think again, our purchasing power has increased just probably 20, 30 % over the past couple of years when looking at buying a house. And it's also a good investment in the sense, Joey, that, Hey, we put in around
Speaker: let's say 50K US and to Japan, if this exchange rate bounces back, that actually is some added returns that we didn't really incorporate or think about in the beginning. Yeah. Great. Thank you. Yeah. Another reason why maybe a bonus reason why supply might be increasing. There is a lot of talk about this Akiyemon day or abandoned house problem in Japan. And with that, the government is going to, I think there's some word on the street that they're going to be implementing a tax for Akiyas.
Speaker: for our last conversation with the reporter at the newspaper. People are worried about bears and boars and animals and nature more or less encroaching on these abandoned houses and thus disturbing neighborhoods. This has been a big problem for the government. So we might see the supply spike, especially as
Speaker: 10 more taxes are in place for abandoned houses. Interesting. Okay. So the owners will try to new taxes come in some owners that have an IKEA that they don't want anything to do with. They'll try to get rid of supply spikes. Interesting. Yup. Exactly. And I think the common thing is because of the aging population and the decreasing population and people moving to Tokyo or some of these bigger cities, like oftentimes what we're, I think we're on the street or what we're hearing is.
Speaker: A lot of inheritors are inheriting a house in the suburbs. They don't want to deal with it. Especially if they get hit with a tax, they're going to be looking to sell very quickly and as cheap as possible. So that combination I think is really driving that price down.
Speaker: But if you're listening to this, you've probably heard like, Hey, there's free houses in Japan. I also want to warrant the other side that even if the house is free, it's going to require a ton of work. We pay it again, 42 K for our house. We're probably putting around that same amount into renovation. So just know, I think it's click Beatty. There's free houses in Japan, but these are some of the reasons. Yeah. And we had to pay those other expenses to a car to get all these free houses are going to be in rural areas. You're going to need a car fight.
Speaker: You're going to need to buy food or restaurants while you're there fixing up your own house. And yeah, there's going to be a lot more expenses on top of that free house. Totally. So yeah, the houses are cheap and they're cheap for some of the reasons we mentioned. But again, I wouldn't consider them free by any sense. You're going to need cash to fix things up and set up operations and maintain it. The free houses, yeah, just looking at them, they are a ton of work. They're really far away. Pretty undesirable. If you're looking for a real abandoned house in a desirable location.
Speaker: certain walk distance away from the train station, it's going to cost a little bit more than that free price point that you're hearing. All right. Final plug. Acia dash mart .com search discovery tool that we're making. You can find some of these abandoned houses. I don't think we have any that are free, but there are some that in a couple thousand range. Joey, have you seen, I've seen as low as $200, $300 it gave it, given the exchange rate. Yeah, nothing free, but yeah, there are sub a thousand on there. So.
Speaker: Interesting to look at. So again, just to recap why Japanese properties are so cheap. One, there's a huge supply. Two, Japan has seen economic stagnation, which kind of changed their view on real estate and as an asset. Three, there's been a huge decreasing population and a huge demographic shift of people moving to larger cities. Four, the government sees this as a depreciating asset.
Speaker: Five, people like new things in Japan, don't think old houses have that worth. Six, the US dollar to Japanese yen ratio or currency exchange is favorable for the US dollar. And the added bonus is the government is putting in new taxes soon. So a lot of inheritors or people that are just getting Akiyas on their lap are encouraged to sell them, I think sooner than later.
Speaker: Final question for you, Takei. One question I get, like people have asked me a lot is, supply's increasing. Shouldn't I just wait five years and then buy when it's cheaper? Do you have any thoughts on that?
Speaker: Yeah, I'd say the supply is increasing, but that supply is rapidly, I'd say, increasing in more of the countryside. So depending on where you want. So us in particular shifted a little bit. We're thinking about challenging Tokyo. I bet you that more people are starting to become aware of this housing problem in Japan. So they're capitalizing and looking
Speaker: The supply in Tokyo, I think is going to be much more sought after. So, two trends of thoughts, there might be, but I would say like the majority of these new houses coming up are going to be countryside, a little bit less desirable. Do you agree with that or what do you think? Yeah, yeah. That was a great answer actually. Yeah. If you want to buy up a whole, I don't know, streets or town to the Japanese countryside, yeah, wait 20 years potentially. But yeah, if you're thinking more about some sort of urban center, especially Tokyo, yeah, I do think that the recent hype
Speaker: best to move faster than slower. Yeah, but I don't know, I, I, it'll be really interesting. There's around like 10 million abandoned house. Now there's going to be 20 million in 10 years. What is Japan going to look like? We've had a lot of those questions ourselves in our neighborhood with, we were there for two months and.
Speaker: two or three abandoned houses showed up on our block. There's bigger problems in Japan to keep in mind too. Then yeah, you could, and also natural disaster is also something that people, I don't know, you can really predict an earthquake, but they keep on saying there's going to be a large earthquake in Japan in the next 20 years or something.
Speaker: All right, Joey, good episode. We're going to send this episode to anyone that asks us this question. I think this is a little bit more detailed response, but again, the hype is real, but the free house hype is not real in my opinion. If you're interested in buying in Japan, just know it is cheap and there's going to be more supply coming soon.
