A former Geisha house in Shibuya. Sold last year for the land, with the house demolished shortly after.

If you are looking for land to build a house or other building on in Japan, particularly in a city, you may find lots are small in size while supply is limited. Of Japan’s total land size of 37,800,000 hectares, 66% is forest and 12% is farmland. Land for building purposes comprises 1,960,000 hectares or just 5% of the total – and that includes land that is already built on. The remainder is roads, rivers and waterways, and fields.

In an urban location, most of the land is already occupied, so domestic buyers will also consider lots with existing buildings that they can demolish. This is unavoidable in an area with a short supply of listings. If you limit yourself only to vacant lots, you may find very few options. 

Land listings may be advertised as the house or building to be included ‘as-is’ with the expectation that the buyer will demolish it. Or, depending on the circumstances of the seller, the seller may be prepared to demolish the building to ground level to provide the vacant land to the buyer (this demolition often does not include excavating the foundations). 

When you see an old house for sale, it’s often going to be listed simply at land value for this very reason. In some cases, it might be slightly below land value to account for the cost of demolition (although that may not amount to much for smaller, wooden homes as they can be cheap to demolish). The only exception would be if that particular building had some significant historical or cultural value, but that would be a rare example.

This ties into the reasoning behind why older buildings and homes can lose their value over time. Not many buyers will want to pay top dollar for a rickety and poorly-built 60-year old house, but they may be interested in paying the land value in order to build a new house on it. They will pay even more if the land has somewhat denser zoning that allows a larger commercial building. This isn’t unique to Japan. Similar trends occur in other international cities where demand is high but land supply is low. 

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