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Comment by pcurve | Hacker News Reader

"The median price for a home in Tokyo and its surrounding three prefectures is 28 million yen, or around $270,000."

Just fyi, if you only include Tokyo, price nearly doubles. It doesn't make the best comparison because Tokyo + 3 prefecture = 38 million people with over 5000 square miles.

However, that chart alone is very compelling because it shows something that you don't see anywhere else; declining housing price.

Is centralized and lax housing regulations the main reason for this? I don't think the author makes a strong argument, but it's certainly a contributing reason.

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A huge part of lower home prices in Japan is that they treat housing as a depreciating asset in their economy. So it's more like buying a car than making an investment.

http://freakonomics.com/2014/02/26/why-are-japanese-homes-di...

That is an asian thing. Im seeing it with chinese buyers in Vancouver. They dont want a "used" house. New houses are being built to low standards on the assumption that any future buyer will rebuild anyway. Give me a 35yo house with a proven track record over some new thing that could be leaking come winter. Houses are not cars.

And as that Freakonomics episode notes, there's at least an argument that disposable houses have been a factor in the Japanese economic slump. There are good reasons to rebuild housing from scratch (and some Japanese history that probably played into the disposable housing dynamic). But compared to the US, rebuilding housing every 35 years means that you're destroying a lot of capital.

Much depends on specifics. Any 35yo house will have been built to radically different codes. It will probably not be near the maximum square footage now allowed on its lot. So, purely from an investor's point of view, the house is holding back the price. Pulling it may actually makes the land worth more. In my neighbourhood it isnt easy to get a permit simply to replace a small house with a larger one .... unless something catastrophic happens and the old house is doomed. There have been too many leaky roofs left for years, and a few fires, which conveniently lead to the house being declared unliveable or unsafe, the first step to getting a new permit. In such situations the house is definitely worth more down than up.

> Any 35yo house will have been built to radically different codes

And in Japan, earthquake resistance codes change about every 10-20 years, meaning a 35yo house is measurably worse than a new one.

I definitely considered the age of the building when we picked our new apartment due to these concerns.

The Freakonomics podcast referenced upthread does mention earthquake codes and some other factors that have helped lead to houses becoming disposable. Nonetheless, I'd note though that it's not really the case in, say, the Bay Area. It's a behavior that seems to have evolved beyond practical reasons to become a cultural pattern.

There are also good reasons to junk old cars but it would be pretty inefficient if it became a societal taboo to drive a car over five years old or to purchase a used model.

It also helps when houses are being depopulated because people are aging out of houses.

There used to be an Australian guy who went around buying and fixing undervalued houses in Japan. While out in his searches, he'd point out the many unoccupied houses.

As an aside, when is Japan going to reconsider how it calculates unemployment? As it is, their unemployment is like 3.7% yet many many younger people work for as temps, which is sort of counterintuitive for a very tight labor market.

And yet that's the same way the US calculates unemployment for U3 (the most commonly reported rate), leading to the same misrepresentation of the actual unemployment situation.

U3 is standard precisely so that we can compare differences between countries. If people don't like what it's measuring, then they can certainly use one of the other metrics like U4, U5, or U6.

I don't have a problem with U3 at all. I have a problem with it being used as the de facto measure of employment health in the media when it tells only a small part of the story for average workers. You typically have to search for U6 yourself, while U3 is reported by the press every month.

Yes if you want to be a well informed citizen you have to mostly ignore the mainstream media and actively seek out alternative sources. That shouldn't be a surprise to anyone here.

Then I guess labor dynamics are different, else why does one see people doing low value add jobs like pachinko, vending machine stuffers, McDonald's, people "directing traffic" when they could get more meaningful jobs (if the job market is so good, esp. Tokyo)

> yet many many younger people work for as temps, which is sort of counterintuitive for a very tight labor market.

because many of these temps younger folks are university students at the same time. In japan university is only very few hours of attendance every week, so it leaves them with tons of free time to get a side-job.

The unemployment rate is actually 3.1% now, and they calculate the rate the same as all the other countries in the OECD.

That sounds bigger than it is. A circle with 40 mile radius ~= 5000miles. If you go a similar distance from NYC or DC etc the prices are still inflated because it's considered commuting distance, plus this is an average.

For comparison the US median home price is ~220k. But, the Median price in Fairfax VA which is 30 miles from DC is $510,000. Chantilly VA which is ~35 miles from DC is 400k.

"That sounds bigger than it is?"

Per Wikipedia, New York city's land area is 790km^2. Tokyo's is 2187km^2. Tokyo Metro's population density is 6,224/km^2 (I picked the higher of the possible numbers for this). New York City's density is 10,431/km^2.

There's really no argument you can make that New York should be cheaper than Tokyo based on density alone. Tokyo's big secret is sprawl.

Right, Tokyo is very wide-spread. I believe it's the incredible infrastructure that allows people to commute to work easily. There is surprisingly little traffic for a city of that size.

Leaving Tokyo for Kyoto by train I kept seeing apartment buildings and houses for the first 50km or so.

This sort of super sprawl is enabled by Japanese employers' promises of lifetime employment. You buy near where you work, and your job lasts as long as a mortgage. No need to buy in Mountain View because 20 employers are nearby.

NYC is limited by arbritraty state lines, if you look at the physical reality there is just as much sprawl it's just across state lines past Newark which is the same metro area with slightly different taxes and still has 11,654 people per square mile.

Further people commute to the city's center which is why they tend to have lower population density than parts of their surrounding area. Which is why https://en.m.wikipedia.org/wiki/Guttenberg,_New_Jersey has twice NYC's population density even with shorter buildings.

It's really hard in general to compare metropolitan areas in an apple-to-apples way for reasons like this. As a result, people tend to draw misleading conclusions based on often meaningless administrative boundaries. (e.g. Paris often cited as having extraordinary high density based on the small area that is technically the city.)

Current market conditions in the US are a major outlier that will correct.

Prices are high because we have an inflationary monetary policy around housing. Essentially all mortgages are nearly risk-free to the lender, and are essentially implicit federal obligations.

I'm not sure it will correct as much as you think. The high prices are mostly driven by regional wealth inequality leading to the only good jobs being in a handful of cities. That job concentration massively increases housing costs in those areas. SV is a great example of this.

I didn't say anything about timeframe... but those kinds of conditions don't last forever.

Structural inequality is dangerous. All it takes is a little insurrection and the "faith and credit" gets depleted.

Hopefully we improve the stage of things.

> median price for a home in Tokyo and its surrounding three prefectures is 28 million yen

For this price you get a shack in the far suburbs of Tokyo. Anything remotely close to the center goes to 100 million yen. And prices are going up before of the Olympic Bubble, too. It's completely crazy.

Of course keeping in mind that a "far suburb of Tokyo" will still have a population of 400,000 or so, roughly comparable to the size of Miami or Oakland. Yokohama is definitely not Tokyo, but its population is 3.7 million, larger than Chicago and just a bit smaller than Los Angeles.

Agree with your point, but a bed town far away from the Tokyo center is still a bed town. Which not a very pleasant place to live in (99% residential, almost no stores, no restaurants around).

Well, everybody's experience is different, I guess. But 99% residential and no stores or restaurants is bit hard to believe.

What I mean is, nothing nearby enough. The zoning is clearly made to favor residential spaces in extremely high proportions, unlike an ordinary city center.

>>> However, that chart alone is very compelling because it shows something that you don't see anywhere else; declining housing price.

I find it strange that you would think that. I would expect accommodation prices to drop in the vast majority of areas. Obviously, I am biased the other way because of the places I know.

The economy outside of major cities is pretty bad and it's only getting worse.

P.S. There is also a matter of timespan. If you look at 20-30 years, everything is going up. If you look at 1-5 years, it's stable or going down.

In 20-30 years an accommodation loses about 50 to 60% of its value in Japan. The only thing that is stable or gaining any value in Japan is land. The rest is just a deprecating asset.

This is why you buy a fully-depreciated ~40-year-old apartment or house.

I spent my entire life's savings to do this and it was the best decision I ever made. When and if I leave Tokyo, I will rent it out for side income. I can't overstate the peace of mind this gives me.

What happens though when they decide to tear down the building? How much of the value do you recoup?

It's cultural. We believe housing is an investment.

Not the case in Japan.

That belief in the market drives the direction.

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