About 60% of Japan’s rental housing stock was built before the year 2000, and roughly a third of it dates back before the 1981 earthquake-resistance code revision. I own 9 rental units across three small buildings, and the oldest one went up in 1978. When I bought that building, the room rents were sitting 20% below the neighborhood average simply because the unit looked and felt its age the moment a prospective tenant walked in.
That gap between old and new is exactly what drives renovation demand in this country right now, and it is not slowing down. If anything, the older the national housing stock gets, the more money moves into kitchens, bathrooms, and insulation instead of new construction.
Why Japan’s housing stock keeps getting older
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Japan’s population has been shrinking for over a decade, so fewer new units get built each year relative to what already exists. Meanwhile the average wooden rental building has a usable life well past 40 years if it is maintained properly, even though the tax depreciation schedule treats a wooden structure as worthless after 22 years. That mismatch matters for landlords: a building can be fully depreciated on paper while tenants still expect it to function like something built last year. I have three units from the 1980s and two from the 1990s, and none of them received a full renovation in the 15 years I have owned them, only patch repairs here and there as things broke.
What tenants actually reject
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In my experience showing rooms, tenants rarely reject a building because of its age on paper. They reject it because of specific, visible problems: a bathroom without a separate shower stall (bath and toilet combined into one small room, sometimes called a 3-point unit bath here), single-pane aluminum sash windows that fog up every winter morning, and a kitchen with only two gas burners and almost no counter space. When I replaced a 1985 combined unit bath with a separated bath and toilet for about 850,000 yen, the average vacancy period for that room dropped from 47 days to 12 days across the next three tenant turnovers.
The renovation triggers I watch for
I do not renovate on a fixed schedule tied to a building’s age. Instead I watch for three signals that tell me a specific unit is about to become hard to rent:
- Two consecutive tenants leaving within 18 months, which usually means the room is losing on comparison even when nobody says so directly during the walkthrough
- A rent that falls more than 10% below the area’s average for a comparable floor plan and size
- Visible water staining, peeling wallpaper, or a water heater older than 15 years, since those problems tend to show up together in a cluster
Once two of those three signals show up on the same unit, I schedule the renovation within the next fiscal year rather than waiting for a full vacancy to force my hand later. I also keep a simple spreadsheet ranking all 9 units by how many of the three signals each one is showing, and I review it every quarter so nothing slips through for years the way that 1978 building almost did before I bought it.
Budgeting for renovation on an older building
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Costs scale with how old a building’s core systems are, not just its cosmetic finish. A simple wallpaper and flooring refresh on a 20 square meter room runs me around 300,000 yen and takes about four working days with a contractor. A full kitchen and bath replacement on a pre-1990 unit runs closer to 1.2 million yen because the plumbing routes usually need to be redone, not just the visible fixtures on top. I set aside roughly 8% of annual rental income per building specifically for these renovation cycles, kept separate from routine maintenance, because letting a unit sit empty always costs more in lost rent than the repair itself would have.
The akiya effect on renovation demand
Japan now has more than 9 million akiya, or vacant homes, sitting empty nationwide, and that number keeps pushing renovation demand in a direction most people do not expect: it is not only old buildings getting fixed up, it is old buildings getting purchased cheap specifically because they need work done. I have watched local contractors in my area shift from new-build jobs toward renovation contracts over the past five years, and quote turnaround times have gotten noticeably shorter because renovation has become their main line of business. That is good news for landlords like me, since it means more competition among contractors, and in my experience prices for mid-size renovation jobs have stayed roughly flat over the past three years despite general material cost inflation across the industry. I have also noticed more buyers at the akiya auctions I occasionally browse are first-time landlords rather than developers, which tells me demand for renovation know-how, not just renovation labor, is growing right alongside the housing stock itself.
What this means going forward
As more of the national housing stock crosses the 30 and 40 year marks, I expect renovation spending to keep outpacing new construction spending across the rental sector. Tenants are getting pickier even as they accept older buildings, because a well-renovated old unit now competes directly with new builds on price per square meter. For any landlord holding property built before 2000, a renovation budget is not optional anymore, it is the difference between a room that rents out again in two weeks and one that sits empty for two months straight.
That is the calculation I run on every one of my 9 properties before I decide what gets fixed first.
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