Once a home is more than 10 or 15 years old, its value is worse than nothing because of the cost of demolishing it. Land without anything on it has a higher value than land with a pre-owned house on it.

Japanese buyers preferring new over used homes.

That doesn't really tell the story. The houses and condos built in Japan in the 70s, 80s and 90s were atrocious, in terms of functionality and appearance. If I, or most people in Western countries, had houses like that, we would demolish them too.

Once a home is more than 10 or 15 years old, its value is worse than nothing because of the cost of demolishing it. Land without anything on it has a higher value than land with a pre-owned house on it.

That's actual excuse building houses with very poor isulation for noise, heat and cold.

Build houses to last for 100 years and people will buy them even if pre-owned. Build them to last 20 and you will get to this situation.

I agree with all the above commentators, but a couple other economic considerations should be noted.

For one, the building and/or the continuous re-building industry is a major component in Japan's economy which would be different if homes lasted longer. In a way, shoddy homes and/or the societal preference for a new home is a form of planned obsolescence. Like light-bulb makers, car companies, and cell-phone producers, if their products did not wear out or go out of style soon enough, they would go out of business.

Also, home ownership is not just the single largest investment and store of wealth for a person (usually), but it is also one on the biggest components in a country's GDP. When homes lose their re-sale value, the volume of capital is so huge in the overall economy, it is probably the largest single driving factor for low inflation (or even deflation). Yes, some may argue that inflation is necessary theoretically, (especially banks who in turn get more profits, and the government who can perpetually increase spending while their previous debts vanish through inflation), but in reality, nobody with savings actually likes inflation, and the Japanese populace saves more than probably any other country.

Modern houses built in the last 30 years still sell for good prices.

If a house 10-15 years old is worth "worse than nothing" then my almost 50 year-old house must be "worse than everything!"

In our location, there are huge farmhouses with more than 10 rooms which have stood for 80-100 years. They are magnificent houses but now I prefer to live in a western style house and less work for upkeep. 20 years plus 4-6 LDK modern houses sell for ¥20 million plus. One or two million for reform makes them good houses.

10 to 15 years is a huge overstatement, go on any real estate portal and you will see houses that old listed for significantly above the land value.

That said, the general trend being described is true, but its more like 30 to 40 years before a house completely loses its value.

Its an insanely wasteful market, the houses built before the 80s really were junk, but there us no reason more recently built houses can’t hold value like they do everywhere else in the world

To give an idea of how insanely inefficient this is, Japan currently has a massive oversupply of houses with millions sitting empty. It also has a population shrinking by about half a million a year, a trend that is going to accelerate and result in an ever increasing number of empty houses.

Despite this, Japan built more than 800,000 new houses last year. That is actually more new houses built than the number of Japanese people who were born in the same year. This is just insanely out of whack - the country can’t afford to keep pouring a big slice of its GDP every year into building redundant houses.

Can you trust a chief economist who can't spell "worth"?

Besides the quote most certainly being a translation of his original Japanese, you believe the sentence should be "its value is worth than nothing"?

That would be thilly.

rainyday - spot on.

Japan likes to preach about it's "mottainai" society.

But the insane waste that goes into the whole build-knockdown housing culture is beyond words.

That houses for most common folks - their biggest expenditure in a lifetime - can be firstly not built so well and then decrease in value every year like a car to finally be abandoned or knocked down is bordering on criminal waste.

I've accompanied many Japanese groups overseas over the years and all marvel at the beautiful homes and suburbs. They are often amazed when I tell them they are between 60 - 150 years old. And the shock when I tell them they are more often than not valued higher than new homes is funny to see.

I tell them people cherish their homes, they spend time/energy/money on maintenance and renovations and develop lovely outside areas and gardens.

A 70 year old well looked after updated house with established gardens will always be sought after.

The idea that new is best hence of more value is a lie created by Inc to perpetuate the waste cycle and garner more money for them.

I don't know any other OECD country where this happens.

I'm surprised Koo is saying this, because he has some interesting macro theories about Japan, principally that zero interest rates, later copied in the West, were a terrible mistake.

Anyway he is wrong here. The "10-15 years" is completely wrong. Any 25 year old house will have been built to post-Great Hanshin Earthquake standards. In many parts of the country, it will still have value, especially because new gomi rules mean demolishing costs more and woodshock/inflation/high oil/weak yen/tight labour market/10% consumption tax all mean building new costs much more than it ever used to. In some places, building new has gone up 30-40% in a few years. Tight labour market means any reputable builder will be run off their feet and unlikely to start any build for you for months. There are far more examples of and knowledge about renovating out there now and far less stigma about doing it. "Newlyweds must have a newbuild" has gone the same way as "a 25 year old woman is a Christmas cake".

Regardless of the above, real estate is still real estate and the most important thing is location. A twenty year old house will only be of zero value in a declining town. It would be worth a large % of the build cost plus the land value (which will have gone up) in Setagaya. Even second hand mansions with tiny allocated land have gone up in Tokyo.

Most of the land and older houses here on Amami is overpriced and/or offlimits,due to locals' greed ,and incomers' speculation.

Therefore,cheapass 'mansion' apartments are proliferating,due to subsidies on renting for teachers and government staff.

It's a disgrace.

Not sure what or where this guy is taking about.

Perhaps in some countryside areas but even then no unless the house is a totally run down piece of junk.

In Tokyo, or any major area even Saitama in places like wako, Kawaguchi, or Kanazawa etc..

A piece of land with a 10 or 15 year old house is still more valuable than just the land.

If Koo was right then I could knock my place down and get more if I sell it, and judging by the land prices near my home and what I have already been offered for my house which is older than 15 years and not for sale but we are frequently offered more than we paid (note it is in Tokyo 23 and a double kitchen set up).

Recent sales 18 year old house, land 68 m2, house 92m2 sold ¥47 million.

Empty lot 71m2 sold ¥35 million.

That will all change once foreigners and Chinese move in and buy up everything. They will create their own communities, its just a matter of time. You can see the foreign population growing in Japan it is inevitable!

I think that the paperwork to transfer ownership when the descendants are many and scattered is part of the problem.