The Daily Update - Vacant Possessions

That Japan’s population is ageing will not come as a surprise to anyone. Having peaked in October 2010 at a fraction over 128 million, since then Japan’s population has been shrinking at the rate of around 200 thousand per annum. However, this seemingly modest decline masks a much bigger shift which lies beneath the surface.

Japan’s birth rate currently stands at 1.43 children per woman which is well below the 2.07 births estimated to be the level required to keep the population stable. Although the fertility rate has been below this level since 1973, increasing life expectancy resulted in the overall population continuing to grow for almost four decades. However, in the mid 1990’s Japan’s working age population started to decline and has since shrunk by almost 10 million people. Today, Japan’s working age population stands at a little under 60 million people a decline of around 15% from the mid 1990 peak.

Whilst the demographic challenges faced by Japan are widely known, the repercussions of the ageing population are less widely discussed. Today Japan has 8 million empty homes and predictions by the Fujitsu Research Institute suggest that the number of empty homes in Japan will reach 20 million by 2033, a third of the country's entire housing stock! The net result is that houses in Japan are literally being given away for free. When thought about in these terms, it is easy to see why demand in Japan is so weak, with the country failing to generate any meaningful growth, or inflation for that matter, since the working age population started to decline.

This is not a uniquely Japanese problem. Take a look at Italy, where the working age population started to decline after 2013. Like Japan, Italy has also struggled to generate economic growth (and recently re-entered recession), having averaged a minus 0.3% growth rate over the past decade. The future doesn’t look much brighter for the country with the IMF projecting a growth rate of under 1% for each of the next five years.

One bright spot though is Italian property, but not in the way you might imagine. Across Italy there are believed to be over 2 million properties lying empty and last year the Sardinian town of Ollolai announced a plan to sell 200 homes for just €1 each in order to repopulate and revive the rural town. There may be a plus side to getting older after all.

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