Millions of empty houses in Japan attract foreign interest

Buying a home can feel like an impossible feat as parts of the world face housing shortages. This is not the case with Japan, which is dealing with an oversupply of property.

By 2023, Japan will have more than 9 million “akiyas” – empty homes – according to government data, with some of these properties costing less than $10,000.

These houses, often abandoned and abandoned for decades, are scattered in the countryside and big cities, offering unique opportunities to buyers with creative ideas.

The increase in the number of abandoned homes in Japan is largely due to the population crisis, as the fertility rate drops to 1.2 births per woman in 2023. Meanwhile, the death rate has exceeded the birth rate in Japan, due to the elderly. the population continues to increase.

“The akiya problem has been building for decades, rooted in Japan’s post-war economic boom, which led to a surge in housing construction,” Tetsuya Kaneko, head of research and consulting at Savills Japan told CNBC Make It.

“This problem became more pronounced in the 1990s with the slowdown of the Japanese economy, and has worsened with the active demographic change,” said Kaneko.

Urban migration is another contributing factor to the number of abandoned homes in Japan. “While the younger generation moves to cities for work, rural areas still have an elderly population that may die or be unable to maintain their homes,” he said.

Among local people, akiyas are often stigmatized, and even seen as a “burden,” Kaneko said. So, even if the family home is inherited by the children of the deceased parent, many times, the heirs refuse to use or sell the property, increasing the house left on the market.

In particular, houses over 30 years old “are usually considered old,” Kaneko said, and local residents tend to be concerned about safety issues, high renovation costs and decay, he said. Some people even associate these houses with superstition, “believing that they may be haunted or bring bad luck.”

Ultimately, “a lot of Japanese (people) see akiya as depreciating things that are harder than they are worth,” Michael, founder of the Japanese real estate blog Cheap Houses Japan, told CNBC Make It.

“The cheapest properties are like that for a reason,” he said, whether it’s because the location isn’t desirable, or the cost of renovations is expected to exceed the value of the property.

Japanese Akiyas have attracted the attention of overseas buyers.

“We have noticed an upward trend in questions from abroad… There is an increase in interest and (in) buying akiyas,” said Kaneko.

The increase in foreign interest in property in Japan is partly driven by the pandemic, the trend of remote work, and changing lifestyle choices, Kaneko said.

From young investors to retirees looking for a retreat, “more and more people are looking for a second home, a vacation property, or a renovation project,” he said.

For example, Anton Wormann. He fell in love with Japan after visiting Japan on a work trip. Born and raised in Sweden, the 32-year-old traveled the world in her 20s working as a model before moving to the Asian country in 2018.

“I lived in New York for about two years, and then I was all over Europe … so I know how expensive all these metropolitan things are,” Wormann told CNBC Make It. “There’s no way I could buy a house in one of the places I’ve lived.”

When he discovered that Japan was selling houses cheaply, he decided to buy one for himself. Six years later, Wormann owns seven akiya, and works as a full-time content creator and real estate investor in Japan.

They have completed renovations on three of their properties, and are currently working on four more. Currently, the property, which cost about $110,000 to buy and renovate, generates $11,000 in short-term rental revenue per month.

Wormann said “yes and no.”

Now, the properties are successfully generating six-digit profits every year, but this would not have happened if he had not put in the time and effort to get to know the Japanese culture, language and people, he said.

“You have to create a good community and a good social network in Japan to be successful,” Wormann said. “You can’t come without knowing the culture, without knowing how Japan works, and just spend money, because it’s going to be a money pit.”

“If you try to mix it up and do it the right way, there’s definitely a lot of opportunity, but more than that, I think there’s an opportunity to buy cheap real estate for (personal) use,” Wormann said. .

Experts echo this sentiment.

“Akiyas can be a good investment for certain groups, especially hobbyists, DIY renovators or those looking for a quiet rural retreat,” says Kaneko.

“However, it may not be suitable for institutional investors or those looking for quick or large returns, due to high renovation costs and limited resale potential in some areas,” he said, adding that scalability could also be a limiting factor.

It is important to expect that the cost can be substantial, especially if the house needs major structural work, Kaneko added, and consider that the process of buying a house can be complex with language barriers and the need to navigate local authorities.

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