In Japan, folks know that houses depreciate

image credit: insho impression CC BY-ND 2.0

According to this post, Japanese don’t expect the value of their houses to grow.  It seems that they routinely recognize the house and land as separate purchases, and after a few decades the house might have no value at all.  The inference is that land value also might not increase, but at least is unlikely to drop much. (Of course the same trends in value occur in the U S, but we tend not to recognize it.)

As a result, empty-nesters in Japan don’t count on funding their retirements by selling their houses.  As noted in the comments, this also means that housing in Japan is much more affordable than in North America.

Another post by the same writers observes that vacant land in Japan is subject to very high taxes — six times the rate for land with structures.  So landowners are reluctant to demolish worthless houses.  The result is over 13% of houses (as of 2013) were vacant, many of them deteriorated and uninhabitable.    (This article asserts that Japan had 8.5 million “abandoned homes” in 2018, but provides no source and doesn’t define “abandoned.”  This table from the Japan Statistics Bureau reports 8,764,400 vacant dwellings, 14% of Japan’s housing. Most are “for sale” or “for rent.” )

14% seems like a lot, but the equivalent U S rate is 12.2% (according to the press release here which might soon be memory-holed in favor of an update.)


Real estate can help pay for transit

Haven’t posted much lately; busy with other things, including trying to clear off my desk.  In the process of which I found some notes of interest

How do you fund transit in the “most liveable city in the world?” Vancouver uses the real estate tax to cover about 35% of its operating shortfall (net of fares).  Fuel tax covers an almost equal amount (See this pdf). One can imagine how well Chicago’s transit system could run if funded this way, assuming also that it was competently planned and managed.

Unfortunately, Vancouver fails to fund capital costs in this way, relying instead on what Canadians call “senior governments,” meaning provincial and federal funds.  Probably that has something to do with the continuing real estate bubble in the area.

I also found notes I took at a conference in July concerning Japanese high speed rail services.  Japan is said to be the only country with privately-owned high speed passenger rail.  How is it funded? Hint: JR-East, one of the big operators of high speed trains, gets 32% of its gross revenue (see this pdf) from real estate it owns, and intends to grow this to 40 by collecting more of the value that good transport gives to real estate.