Japan Is An Architect's Dream Market Because Homes Are Seen As Disposable

In most countries, homes appreciate in value but that's not the case everywhere.

In Japan, new buyers often bulldoze a home and build a new one, according to Freakanomics, which set out to answer the question, "Why Are Japanese Homes Disposable?"

Jiro Yoshida, a professor at Penn State University who specializes in real-estate economics, answered the question in a recent radio podcast.

Per capita, there are nearly four times as many architects in Japan as in the U.S. (here's data from the International Union of Architects), and more than twice as many construction workers, Yoshida said.

The reason, in large part, is the demand for new homes there.

There is no traditional housing boom happening in Japan. In fact, the population is shrinking and the economy's growth is stagnant.

The demand stems from the demolition rate of homes — half of all the homes in Japan are demolished before they are 38 years old.

Durability and quality of the homes is apparently not a factor either.

Alastair Townsend, a British-American architect living in Japan, is "perplexed" by the housing scenario there.

"The houses that are built today exceed the quality of just about any other country in the world, at least for timber buildings. So there's really no reason that they should drop in value and be demolished," he said.

It is the culture and mentality towards the home in Japan that has created the environment ripe for architectural redesigns and customization.

That's great for creatives, but economists argue that mentality is harmful to the country.

Richard Koo, chief economist at the Nomura Research Institute, argues the unnecessary demolition is a waste of precious capital in a paper titled, "Obstacles to Affluence: Thoughts on Japanese Housing."

"And so you tear down the building, you build another one, then you tear down the building, and you keep on building another one, you're not building wealth on top of wealth...And it's a very poor investment. Compared to Americans or Europeans, or even other Asian countries where people are building wealth on top of wealth because your house is [a] capital good. And if you do a certain amount of maintenance you can expect to sell the house at a higher price. But in the Japanese case once you expect to sell it you expect to sell at a lower price 10 or 15 years later. And that's no way to build an affluent society," he said.

The details about the housing situation in Japan are fascinating and worth listening to at iTunes. you can also subscribe to the Freakonomics the RSS feed or read the transcript.