Context
This is an interview of a real estate expert and an expert of population studies. They discuss how population decline will affect Japan’s real estate market.
Makino Tomohiro 牧野知弘: Real estate analyst and entrepreneur; author of numerous books about real estate
Kawai Masashi 河合雅司: Journalist, researcher, and author of best-selling books on population decline
Books by Kawai cited in the interview:
未来の年表
縮んで勝つ ～人口減少日本の活路～
2030年の東京
Highlights
- The government’s prediction of population decline is far too optimistic. The real rates of population decline are likely far worse.
- Population decline will lead to reduced demand for large family homes, with more focus on smaller residences like one-bedroom apartments and studios.
- The rise in solo-living, especially among seniors, will significantly shape future residential planning and decrease the need for multi-bedroom properties. Solo-living individuals often opt for smaller, older, and more affordable homes, reducing demand for large, newly built properties.
- The number of new residential buildings has already declined by 37% since 2006, as fewer people seek brand-new homes.
- Labor shortages in construction, worsened by an aging workforce, will lead to delays and dysfunction in construction projects.
Translation
Host: In your book, you predict that Japan’s population will decrease by 80% in 100 years. Can you explain your reasoning?
Kawai: This estimation is based on the current trend of the population decreasing by about 4.5% every year. With the current pace of population decline, by 2120, Japan’s population will be 15,000,000, which is about 10% of the current population. Of course, this is a very aggressive estimation; it probably won’t be that bad since we can expect a certain amount of immigrants boosting the number. Although there are many unknown factors that might make my prediction inaccurate, I want people to know that the rate of population decline is likely far worse than what the government estimates. The government’s estimation is too optimistic and naive.
Host: Why do you think the government’s estimation is too optimistic?
Kawai: The government’s prediction of birth rates in the future is not based on any concrete evidence. If you look at recent statistical trends on how birth rates decline every year, you can see that birth rates in the future are likely far lower than the government’s current prediction. The government’s calculation of how many foreigners come to live in Japan is also wrong. The calculation doesn’t account for how many foreigners come and go back to their home countries after a short stay. The government’s calculation looks at how many foreigners enter and exit Japan, which is the wrong way to calculate population growth or decline.
Makino: There’s another important factor that the government is not accounting for. As Japan’s economy declines, salaries in Japan are low compared to other nations. In the future, more young Japanese will need to leave Japan for higher salaries in other countries.
Kawai: Actually, I don’t think a small number of Japanese going overseas for higher salaries will be such a significant trend that it will affect the population level. However, I think that low salaries in Japan will make Japan unattractive to immigrants, meaning that Japan won’t get enough immigrants to boost the population level. In Japan’s real estate industry, we understand that there’s a labor shortage of construction workers. Salaries for construction workers in Japan are low compared to other nations. We need to rely on immigrants for construction work, but the low salaries might fail to attract enough immigrant workers.
Makino: There are many cases of labor shortages on construction sites, especially after many immigrant workers returned to their home countries due to COVID. There is also a severe shortage of young talents who want to take on supervising roles on construction sites. Young people in Japan think the job is too tough and don’t want to do it. On the other hand, when we try to give supervising roles to immigrant workers, the client can’t accept it. The lack of supervisors has led to a lot of chaos on construction sites.
Kawai: My book finds that at least 36% of construction workers are 55 years old or beyond. Only 12% are in their 20s. As birth rates drop, construction sites will be increasingly staffed by old people. If we can’t attract foreign workers, Japan’s construction sites will become dysfunctional. We won’t be able to build anymore.
Makino: Nowadays, delays are increasingly common for construction projects. There are many factors causing the delays, but labor shortage is a prominent reason. In a recent project I was involved in, we just couldn’t find an elevator technician, and we had to tell the tenants to use the stairs. Bizarre things like this will be more and more common. There is a shortage of general labor and also a shortage of talents with specific skills.
Host: Despite the population decline, there might be more and more households as families increasingly separate into different households. Is that true?
Kawai: Yes. Nowadays, it’s more common for people to live alone, which is why the number of households will increase even as the population decreases. The number of households will likely peak by 2030. The proportion of those living alone will keep increasing.
Makino: Contrary to popular perceptions, it’s not young people who are increasingly living alone. It’s actually seniors who are pulling up the number of solo households. There is a sharp increase of seniors who live alone due to their spouses passing away.
Kawai: We can also expect an increase of seniors who live alone because they are never married. By 2035, about 50% of male seniors will be unmarried (as in having never been married). For female seniors, it will be about 20%. By 2050, about 20% of all households will be solo-living seniors.
Makino: This will significantly change how residential buildings are designed and planned. In the past, the typical family was a couple with a few kids. In the future, there will be more solo households, especially solo-living seniors, meaning that the sizes of residences will likely decrease. Recently, residences with 4 bedrooms are difficult to sell. In the future, developers will focus on building one-bedrooms and studio apartments.
Kawai: The peak of the number of new residential buildings was 2006. In 2023, the number has declined by 37% compared to the 2006 peak. There is an obvious trend of less and less demand for new residential buildings. This is partially because solo-living people generally don’t need to buy brand-new houses/apartments. If you live alone, you just pick a small place in a convenient location. You’d just rent or buy a cheap home that’s not brand new.
Host: In the past, there has been a lot of debate over whether it’s better to rent or buy. In the future, will renting be the default choice?
Makino: There will be more variety in living arrangements. In the past, there was a standard way of living, which was a couple with kids. This standard family needs a big house, usually in the suburbs. In the future, there will be less and less demand for a suburban big family house.
Kawai: Also, as the economy declines, savings become stretched thin, and lifespans increase, seniors will be increasingly unable to financially help out their children. This means that younger people won’t be able to rely on their parents for a down payment for buying a house. This will also reduce the number of properties being sold. We can expect drastic changes in the real estate industry in the coming decades.
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