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Prepared by Yuko Hashimoto (RES), Gee Hee Hong (APD), and Xiaoxiao Zhang (University of Cambridge).
Throughout the chapter, with the exception of Box 1, residential land prices are used as a proxy for housing prices.
According to the National Survey of Family Income and Expenditure (2014, for two-person households), there is great variation across prefectures as to how much household wealth can be explained by housing. With housing accounting for an average of 66 percent of household wealth (nationwide, likely exaggerated as it focuses on two-person households, who are likely to have a house), this is somewhat lower than other advanced economies – United States about 70 percent, Spain, Greece, Italy around 80 percent. For Japanese prefectures, this ranges from 52 percent (Shinamane prefecture) to Tokyo (80 percent), and Okinawa (above 90 percent).
It used to be that the tax rate on land is reduced to one sixth of the appraised value if there remains a residential structure on the land. The initial motivation for this regulation was to accelerate the high utilization of land by giving an incentive to home construction during the years when the population grew. However, this tax incentive is one of the causes of the high vacancy rate in Japan, as the owner of the property had an incentive to leave the property as is, without demolishing the structure, to benefit from the lower property tax rate. New legislation was enacted in 2014 to accelerate the demolition of vacant houses.