Japanese market of existing housing is fairly quiet and inactive in comparison to those markets in other developed countries. The Ministry of Land, Infrastructure, Transport and Tourism (2013) pointed out that a lack of proper feedback system cause the market to evaluate only legal residual value of resale properties rather than intrinsic value of resale housing in Japan. They are proposing that an evaluation system needs to reflect not only the age of building but also quality of maintenance and retrofit and properly estimated economic life of housing. However, Yamazaki (2007) argues that most Japanese accept a notion that the housing asset decreases as they age, despite of maintenance and retrofit. Based on this perspective, Japanese buyers might not accept the proposed economic life of housing discussed above, and stick to a notion that housing value would decrease with time regardless of new evaluation system.
According to Koo-Sasaki (2008), housing of Japan loses all the value in about 15 years old. Thus a life of housing in Japan is very short, many owners of Japanese housing do not work hard to raise their housing value. However it is necessary to make it clear whether most Japanese recognize that housing value decreases with time, even if the owner of housing works hard to raise its value. By the way, even in Japan, a lot of rental housing are managed properly because it is necessary to maintain their housing value in the market. We thought that the estimated rate of age depreciation in Japan would be about the same between privately owned housing managed well and rental housing. Therefore at first we divided contribution to a rent for rental housing into the land and building by performing a regression analysis of pooled data with using the Housing and Land Survey in the Statistics Bureau of the Japanese government. Based on the result, we estimated age depreciation of asset in commercial rental housing in Japan after we estimated age depreciation of rent in commercial rental housing. This was regarded as age depreciation of properly managed housing. We tried to clarify whether a life of well managed housing is longer than privately-owned properties in Japan. We analyzed the situation about a life of housing with the Weibull distribution related to housing destruction probability distributions. In addition, we compared our analysis in Japan with average housing in US based on resources from American Housing Survey in the US Census Bureau.
As a result of analysis from a projection of age depreciation of rent, age depreciation rate of rental housing was more gradual than privately owned housing. In other words, a service life of rental housing was longer than a service life of non-managed average housing. This tendency was especially true in a metropolitan area like Tokyo, Osaka, Nagoya and so on. It also became clear that a service life of housing in the Japanese metropolitan area, even though the age depreciation rate is more gradual in those area, is shorter than those in the United States.
As described above, we could say that privately owned housing with proper maintenance and retrofit could have extended service life, if many Japanese recognize in resale housing market the value of proper care of their houses and that the care could increase their houses' economic value. Thus the system being established by the Ministry of Land, Infrastructure, Transport and Tourism (2013) would be effective in increasing sales volume of secondhand housing market and extending a service life of housing in Japan.
