Why Japanese Homes Depreciate — and Where That Breaks Down
Why Japanese Homes Depreciate — and Where That Breaks Down
Newcomers to the Japanese market are routinely shocked: a 25-year-old wooden house often shows a building value of zero, with the entire price attributed to land. The pattern is real, codified in tax law, and reinforced by buyer behavior — but it no longer holds everywhere.
Where the depreciation comes from
The National Tax Agency's useful-life table assigns:
- Wood-frame: 22 years
- Light-gauge steel: 27 years
- Reinforced concrete (RC): 47 years
Banks lend against the building portion only up to this remaining life, which is why a 30-year wooden house is hard to mortgage. Combined with a cultural preference for new builds and a post-war reconstruction-style market, this pushes prices toward "scrap-and-rebuild" economics in most of the country.
Where it stops working
The depreciation curve assumes generic, replaceable houses. Three categories ignore it:
- Central Tokyo wards (Minato, Shibuya, Chuo, Chiyoda) — land scarcity dominates and well-built RC towers hold value far past their 47-year line.
- Kyoto kominka and machiya — historical premiums and tourism demand have created a parallel market where age increases value.
- Walkable neighborhoods near major JR stations — Yokohama, Fukuoka, central Osaka — where transit access offsets building age.
What it means for buyers
- For most of Japan: price the land, ignore the building. Renovation is your call.
- For premium urban blocks: structure and condition matter again, and a recently renovated unit can outprice newer construction nearby.
- Don't pay for "remaining building life" outside the major metros — the market will not pay you back when you sell.
The 22/47 rule is a useful default, not a universal one. Knowing where it breaks is half the work of finding undervalued inventory.