When comparing housing prices in Japan with those in Korea, Japanese tower mansion prices are often mentioned. Especially when looking at the sale prices of high-end tower mansions located in central Tokyo or Osaka, they often appear cheaper than apartments in Gangnam, Korea, which has spread the perception that “housing in Japan is cheap.” On the other hand, some argue that “housing prices in Japan are also skyrocketing” based on the recent surge in prices of tower mansions in central Tokyo. However, both of these views are misconceptions based on seeing only part of the overall structure of Japan’s residential real estate market.
Source: ChatGPT
- Japanese tower mansions are not representative of the market. Looking at single-family home transaction prices is more accurate.
It’s true that housing prices in Japan are cheaper than in Korea. For example, there are cases where newly built 30-40 story tower mansions located in excellent areas like Minato-ku, Chuo-ku, or Shinjuku-ku in Tokyo are listed for less than 1 billion yen. When converted to Korean won, this appears to be around 900 million won, which can easily give the impression “How can housing in the center of Tokyo be this cheap?” when compared to situations where 30-pyeong apartments in Gangnam cost over 2 billion won. The problem is that this price may be a very exceptional case in the Japanese real estate market.
Tower mansions in Japan are only a tiny portion of the entire real estate market. Single-family homes account for about 53% of Japan’s total housing supply, while mansions (Japanese-style apartments) make up about 43%. And among those, tower mansions account for only about 5% of all mansions. In other words, tower mansions represent just a fraction of a fraction of the entire housing market. Misunderstanding this as representative of the entire market inevitably creates distortion.
Additionally, single-family homes, which make up most of the residential real estate, don’t have uniform prices. While there is some concept of market price due to property development companies, the basic approach is to buy land and commission a design office to build the house. Therefore, prices vary greatly even for the same size. Although such cases are rare, to put it bluntly, if you build a 30-pyeong 3-story house using all kinds of expensive materials for interior finishes, it can become a 300 million yen house. - Japan reflects depreciation in building prices, so older buildings rapidly decrease in value.
Japanese real estate fundamentally operates on the premise of depreciation. Unlike in Korea where apartments become more expensive over time, in Japan, the new construction premium is highest, and the value of buildings decreases over time. In fact, in Japan, whether it’s a house or a mansion, after 20 or 30 years of ownership, the building’s value is often assessed as nearly zero. As a result, newly built mansions are expensive, but just 5 years after completion, they lose 10-30% of their original price. - Japanese people don’t consider buying a house as an investment. And it’s difficult for it to function as an investment.
In Korea, owning a home is central to wealth building, and apartments often function as investment assets. Since they all look similar, they naturally function almost like currency. However, in Japan, houses are difficult to become investment targets. Rental yields are also very low. In reality, if you think about buying a small studio or two-room apartment in Tokyo to collect monthly rent, you might expect about 80,000 yen in monthly rent on a purchase price of about 30 million yen, but when you consider vacancy periods, fixed property taxes of several hundred thousand yen per year, repair reserve funds, and management fees, it’s difficult to achieve even a 2-3% annual return. - Non-residential demand for inheritance tax saving purposes distorts tower mansion prices.
In Japan, tower mansions are often used as tax-saving measures for inheritance and gift purposes by elderly people. Particularly, high-end tower mansions located in central Tokyo or Osaka are frequently purchased by wealthy individuals to transfer assets to their children or to reduce inheritance tax burdens. This is because in Japan’s inheritance tax system, the taxable value of real estate is based on “rosenka” (road-side land prices) rather than actual transaction prices. Rosenka is a land price set annually by the National Tax Agency according to roads, and it’s typically assessed lower than market prices. Moreover, since depreciation is reflected in the tax standard, older buildings have lower tax bases. In other words, even with expensive mansions, the actual inheritance tax assessment can be very low due to the combination of land valuation based on rosenka and depreciated building prices. In contrast, in Korea, taxes are based on the officially announced land prices and standard real estate values set by the Ministry of Land, Infrastructure and Transport, and particularly for apartments, the officially announced land prices are adjusted to be close to actual transaction prices, making the tax basis close to market value. Due to these institutional differences, the tax burden when inheriting or gifting expensive tower mansions in Japan is relatively low, creating demand for such purchases. This demand is not based on actual housing needs but for asset transfer purposes, making it difficult to generalize market prices or interpret them as demand for actual residence. - Due to seismic design and construction cost structures, Japan has many wooden and low-rise homes.
There are also differences in building culture. Japan has many wooden houses, and even if mansions have concrete exterior walls, interior structures and finishing materials are often relatively simple. Japan is a country with frequent earthquakes, so seismic design standards are strict, and wooden construction is much cheaper than steel-reinforced concrete. Building low-rise houses with wood makes it advantageous to meet seismic standards and is much cheaper than reinforced concrete in terms of construction costs. However, as buildings get taller, the structural reinforcement and construction costs needed to satisfy seismic design standards increase exponentially, making high-rise tower mansions very expensive to build.**내진설계와 시공비 구조로 인해 일본은 목조와 저층 위주의 주택이 많다.**
Looking only at tower mansion prices and making statements about Japanese housing prices is a very superficial perception. Japan’s residential real estate market is based on a structure that assumes depreciation, tower mansions are only a tiny fraction of examples, and in most regions, housing prices are declining due to population decrease and aging. Additionally, in Japan, homes are predominantly viewed as consumer goods rather than investment assets. Making comparisons between “Omotesando Tower Mansion” and “Banpo Jeil” prices without properly understanding Japan’s reality is a significant misconception. Although they may have the same floor area, everything else is different.
Three-line summary:
- Japanese housing prices are expensive for new construction but decrease over time due to depreciation.
- Tower mansions are merely a small number of expensive cases, and there is also special demand for inheritance tax savings.
- Rather than making simple comparisons with Korea, it’s necessary to understand the structural differences in the Japanese market.