Last Updated: February 2026
Japan property depreciation confuses many foreign investors when they first encounter it. A wooden house that cost ¥20 million to build might be valued at nearly zero after 22 years on paper, while the land beneath it could double in value. This split between building depreciation and land appreciation is fundamental to understanding how Japanese real estate actually works—and how investors can use it to their advantage.
The fear that Japanese properties become “worthless” keeps some international buyers away. But this fear stems from misunderstanding. Buildings depreciate for tax and accounting purposes, but physical structures can remain sound for 65-77 years. Meanwhile, land in desirable locations continues to appreciate. In 2025, Japan’s national land prices rose 2.7%, the strongest pace in 34 years according to the Ministry of Land, Infrastructure, Transport and Tourism.
This guide breaks down the reality of Japan property depreciation, explains why it happens, and shows how informed investors can turn depreciation into a tax advantage rather than a liability.
The Truth About Japan Property Depreciation
Property depreciation in Japan follows a simple but often misunderstood rule: buildings depreciate, land does not. This split creates both challenges and opportunities depending on where and what you buy.
The Japanese tax code assigns each building type a “statutory useful life” that determines its depreciation period. Wooden houses depreciate over 22 years. Reinforced concrete (RC) buildings used in most condominiums depreciate over 47 years. These timelines don’t reflect actual structural lifespan—they’re accounting conventions that affect taxes and market valuations.
Research from ScienceDirect shows that Japanese residential structures lose approximately 50% of their building value within the first 10 years of construction. After this initial drop, depreciation slows considerably. The building doesn’t fall apart at year 22—the tax code simply allows full depreciation by then.
This depreciation reality affects how you should evaluate properties:
- Total property value = Building value + Land value
- Building value decreases over the statutory useful life
- Land value fluctuates based on location, market conditions, and demand
- Overall property value can rise, fall, or stay flat depending on the balance
For foreign investors, understanding this split is the foundation of smart Japanese real estate investing.
Land vs Building: Why This Split Matters
The land versus building distinction shapes every aspect of Japanese property investment. When you buy a property, you’re purchasing two separate assets with completely different value trajectories.
Land in Japan cannot be depreciated for tax purposes. It also has no expiration date—you own it forever (freehold ownership). In desirable urban areas, land has appreciated strongly. Tokyo’s 23 wards saw residential land prices rise 7.9% in 2024, with commercial land jumping 11.8%.
Buildings depreciate from day one. The structure loses tax value on a fixed schedule regardless of physical condition. A well-maintained building depreciates at the same rate as a neglected one under the tax code.
This creates several investment implications:
| Factor | Land | Building |
|---|---|---|
| Tax depreciation | None allowed | Required annually |
| Value over time | Market-dependent | Decreases to zero |
| Ownership duration | Perpetual | Subject to demolition |
| Investment focus | Location-driven | Condition-dependent |
| Tax benefit | Appreciation taxes | Depreciation deductions |
Smart investors pay attention to the land-to-building value ratio when purchasing. A property with 60% land value and 40% building value holds its overall value better than one with 20% land and 80% building, assuming similar locations.
Important: For detailed information on all property-related taxes, see our Japan Property Tax Guide.
Statutory Useful Life by Construction Type
Japan’s National Tax Agency assigns statutory useful life periods based on building construction materials. These periods determine annual depreciation rates for tax purposes.
Depreciation Periods by Building Type
| Construction Type | Statutory Useful Life | Annual Depreciation Rate |
|---|---|---|
| Wooden residential | 22 years | 4.545% |
| Light steel frame | 19 years | 5.263% |
| Heavy steel frame | 34 years | 2.941% |
| Reinforced concrete (RC) | 47 years | 2.128% |
| Steel reinforced concrete (SRC) | 47 years | 2.128% |
These rates apply to the straight-line depreciation method, which is required for buildings acquired after April 1, 1998.
The construction type significantly impacts long-term ownership costs and value retention:
Wooden houses depreciate fastest. A new wooden house with a ¥10 million building value loses approximately ¥454,500 annually in depreciated value. After 22 years, the building value reaches zero for tax purposes.
RC condominiums depreciate more slowly. The same ¥10 million building value in an RC structure depreciates at about ¥212,800 annually. This slower depreciation, combined with sturdier construction and better locations typical of RC buildings, explains why Tokyo condominiums have appreciated overall despite building depreciation.
Steel structures fall between these extremes. Light steel frames often found in budget apartments depreciate quickly (19 years), while heavy steel commercial buildings get 34 years.
Knowing your building’s construction type is essential before purchasing. It affects both your tax deductions while owning and your resale value when selling.
Why Japanese Buildings Depreciate So Fast
Foreign buyers often wonder why Japanese buildings depreciate more aggressively than properties in Western countries. Several historical and cultural factors explain this pattern.
Post-War Construction Quality
Much of Japan’s housing stock was built rapidly after World War II, using cheaper materials and simpler construction methods. While modern building standards have improved dramatically, the cultural memory of these lower-quality structures persists in how Japanese buyers perceive older homes.
Cultural Preference for New Homes
Japanese homebuyers traditionally prefer new construction. Only 15% of homes sold in Japan are secondhand, according to The Economist. This compares to much higher rates in Western markets where used homes dominate sales. This cultural preference creates weak demand for older properties, reinforcing rapid depreciation.
Frequent Building Code Updates
Japan updates building codes regularly, particularly after major earthquakes. The 1981 earthquake standards revision created a significant divide between “old” and “new” earthquake-resistant buildings. Properties built before 1981 face additional skepticism from buyers and lenders, further accelerating their depreciation.
Scrap and Build Culture
Japan’s “scrap and build” approach treats residential buildings as temporary structures to be demolished and rebuilt rather than renovated. The average demolition age for Japanese houses is 30 years, compared to 55 years in the United States and 77 years in the United Kingdom.
Tax Code Incentives
The tax system itself encourages this pattern. With wooden houses fully depreciating in 22 years, there’s little tax disadvantage to demolishing and rebuilding. Property taxes on older buildings are lower, but the resale value drop often exceeds any tax savings.
Understanding these factors helps foreign investors set realistic expectations. The depreciation pattern isn’t changing quickly, so investment strategies should work within this reality rather than against it.
The 30-Year Myth: What Research Actually Shows
The claim that “Japanese houses become worthless after 30 years” circulates widely among foreign property observers. This statement is misleading in important ways.
What the Data Actually Shows
Research from Real Estate Japan and academic studies reveal that the 30-year figure represents average demolition age—not structural failure. Buildings are typically demolished because of:
- Land value making redevelopment attractive
- Owners choosing to rebuild to current standards
- Cultural preferences for newer construction
- Tax incentives favoring new builds
The physical lifespan of Japanese buildings is considerably longer. Alternative methodologies suggest actual house lifespans average 65-77 years when maintained properly. Many wooden structures built with quality materials survive for centuries—traditional machiya townhouses in Kyoto demonstrate this.
Market Value vs Physical Condition
The disconnect between market value and physical condition creates opportunities for informed buyers:
-
Akiya (vacant houses) often sell at steep discounts despite being structurally sound. Our akiya investment guide covers this opportunity in detail.
-
Older RC condominiums in good locations may have zero building value on paper but remain excellent rental properties.
-
Renovated properties can offer better value than new construction in some markets, though resale remains challenging.
As ScienceDirect research notes: “Structure value loses approximately 50% during the initial 10 years following construction, with depreciation gradually continuing until around 30 years old. This ‘taste for newness’ effect is becoming smaller in recent years, particularly in urban areas.”
The myth oversimplifies a nuanced reality. Properties don’t become worthless—their building value depreciates while land value and rental potential may remain strong.
Japan Property Depreciation as a Tax Benefit for Investors
For rental property investors, depreciation transforms from a paper loss into a genuine tax advantage. Annual depreciation expense offsets rental income, reducing your taxable income significantly.
How Depreciation Tax Deductions Work
When you purchase rental property in Japan, you cannot deduct the full building acquisition cost in the year of purchase. Instead, you spread this cost over the building’s statutory useful life through annual depreciation deductions.
This creates a non-cash expense that reduces taxable income without requiring additional spending.
Example calculation:
A rental property investor purchases a building with:
- Building acquisition cost: ¥20,000,000
- Construction type: Reinforced concrete (RC)
- Statutory useful life: 47 years
- Annual depreciation rate: 2.128%
Annual depreciation deduction: ¥20,000,000 × 0.02128 = ¥425,600
If this investor has ¥1,200,000 in gross rental income and ¥425,600 in depreciation expense (plus other deductible expenses), their taxable rental income drops substantially.
Tax Savings Illustration
Consider an investor with:
- Annual depreciation expense: ¥650,000
- Marginal income tax rate: 50% (including local taxes at higher income levels)
- Annual tax savings: ¥650,000 × 0.50 = ¥325,000
This ¥325,000 represents real money not paid in taxes each year, improving the property’s effective return.
Important Limitations
Depreciation benefits come with caveats:
-
Recapture on sale: When you sell, depreciation previously claimed reduces your cost basis, potentially increasing capital gains tax.
-
2021 law change: As of January 1, 2021, losses from depreciation on second-hand overseas rental properties can no longer offset other income sources in Japan. This closed a popular tax strategy.
-
Actual rental income needed: You can only deduct depreciation against rental income, not against other income types (with limited exceptions).
-
Record-keeping requirements: Tax authorities require detailed documentation of building acquisition costs and depreciation claimed.
For more on rental income taxation, see our complete guide to buying property in Japan.
How to Calculate Building Depreciation
Calculating depreciation correctly requires following specific steps established by Japan’s National Tax Agency.
Step-by-Step Depreciation Calculation
Step 1: Determine Building vs Land Value Split
Your purchase documents should separate building and land values. If not explicitly stated, tax authorities generally accept a maximum 80% building / 20% land split. However, actual ratios vary by property—urban properties often have higher land ratios.
Methods to determine the split include:
- Purchase contract separation
- Fixed asset tax assessment ratio
- Appraiser valuation
- Building reconstruction cost method
Step 2: Identify Construction Type
Check the property registration or building certificate for construction materials:
- 木造 (mokuzō) = Wooden
- 鉄骨造 (tekkotsu-zō) = Steel frame
- 鉄筋コンクリート造 (tekkin konkurīto-zō) = Reinforced concrete
Step 3: Determine Depreciation Rate
For new buildings using straight-line depreciation:
Depreciation Rate = 1 ÷ Statutory Useful Life
| Construction | Useful Life | Rate |
|---|---|---|
| Wooden | 22 years | 0.04545 |
| Light steel | 19 years | 0.05263 |
| Heavy steel | 34 years | 0.02941 |
| RC/SRC | 47 years | 0.02128 |
Step 4: Calculate Annual Depreciation
Annual Depreciation = Building Acquisition Cost × Depreciation Rate
Example:
- Building cost: ¥15,000,000
- Construction: Wooden (22 years)
- Rate: 0.04545
- Annual depreciation: ¥15,000,000 × 0.04545 = ¥681,750
Step 5: Prorate for Partial Years
If you acquire the property mid-year, prorate depreciation by months owned:
Purchased April 1: 9 months of ownership in first year First-year depreciation: ¥681,750 × (9/12) = ¥511,313
Used Property Depreciation Rules
Purchasing used properties requires modified depreciation calculations depending on the building’s age.
Properties Within Statutory Useful Life
For used buildings that haven’t exceeded their statutory useful life, calculate the remaining useful life:
Remaining Useful Life = (Original Life - Elapsed Years) + (Elapsed Years × 0.2)
Example: 15-year-old wooden house
- Original useful life: 22 years
- Elapsed years: 15
- Remaining life: (22 - 15) + (15 × 0.2) = 7 + 3 = 10 years
- Depreciation rate: 1 ÷ 10 = 10%
This accelerates depreciation compared to a new building, providing larger annual deductions.
Properties Exceeding Statutory Useful Life
When a building has exceeded its statutory useful life (e.g., a 25-year-old wooden house):
Modified Useful Life = Original Useful Life × 0.2
Example: 25-year-old wooden house
- Original useful life: 22 years
- Building age: 25 years (exceeds useful life)
- Modified useful life: 22 × 0.2 = 4.4 years
- Depreciation rate: 1 ÷ 4.4 = 22.727%
This creates significant tax deductions in a short period, making older properties attractive for investors seeking immediate tax benefits.
Practical Example
Purchase of 22-year-old RC condominium:
- Building portion: ¥8,000,000
- Original useful life: 47 years
- Elapsed years: 22
- Remaining life: (47 - 22) + (22 × 0.2) = 25 + 4.4 = 29.4 years
- Annual depreciation: ¥8,000,000 ÷ 29.4 = ¥272,109
Condos vs Houses: Different Depreciation Rates
The choice between condominium and detached house significantly impacts depreciation patterns and long-term value retention.
Condominium Advantages
Most Japanese condominiums use reinforced concrete (RC) construction, providing:
- 47-year statutory useful life vs 22 years for wooden houses
- Slower annual depreciation rate (2.128% vs 4.545%)
- Better earthquake resistance under modern building codes
- Shared maintenance costs through management associations
- Prime urban locations where land values appreciate strongly
Tokyo condominiums have shown overall price appreciation in recent years despite building depreciation. This occurs because land value increases outpace building value decreases in desirable areas.
Detached House Advantages
Wooden detached houses offer different benefits:
- Faster depreciation creates larger annual tax deductions
- Full land ownership without shared common areas
- Renovation flexibility without management approval
- Potential for land value if building is demolished
- Lower monthly costs (no management fees)
Investment Strategy Implications
| Factor | Condo | House |
|---|---|---|
| Depreciation speed | Slower | Faster |
| Tax deduction size | Smaller annually | Larger annually |
| Value retention | Generally better | Location-dependent |
| Management complexity | Lower | Higher |
| Rental demand | High in urban areas | Area-dependent |
For foreign investors seeking rental income, condominiums in major cities often provide the better risk-adjusted returns. The slower depreciation, combined with strong rental demand and land appreciation, can deliver positive total returns.
For tax-focused investors or those buying land for future development, detached houses with high land ratios may be more appropriate.
Land Value Trends: The Other Half of the Equation
While buildings depreciate predictably, land values fluctuate based on market conditions. Recent trends have been strongly positive in major metropolitan areas.
2025 Land Price Data
According to the Ministry of Land, Infrastructure, Transport and Tourism:
| Area | Residential Change | Commercial Change |
|---|---|---|
| National average | +2.7% | +3.2% |
| Tokyo 23 wards | +7.9% | +11.8% |
| Osaka city | +2.3-2.7% | +7.6% |
| Regional cities | Varies widely | Varies widely |
Japan’s national land prices rose 2.7% in 2025—the strongest pace since 1991. This 34-year high reflects several factors:
- Sustained low interest rates
- Foreign investment inflows
- Tourism recovery
- Limited new land supply
- Household formation in urban areas
Location Determines Everything
Land appreciation varies dramatically by location:
Appreciating areas:
- Central Tokyo (particularly 23 wards)
- Osaka urban core
- Major regional city centers
- Tourist destinations (Kyoto, Hakone)
- Areas with new transit links
Stagnant or declining areas:
- Rural regions with population decline
- Suburbs far from transit
- Industrial areas losing employment
- Areas without tourism or business drivers
A property in central Tokyo might see land appreciate 7-10% annually while the building depreciates 2-4%. Net result: overall appreciation. The same building in rural Niigata might have flat or declining land values, resulting in net depreciation overall.
This is why our complete guide emphasizes location research before purchasing.
How Depreciation Affects Resale Value
Understanding depreciation helps set realistic expectations for resale.
Market Pricing Reality
Japanese property buyers typically value older buildings at significant discounts regardless of condition. A well-maintained 20-year-old wooden house may sell for little more than land value, even if structurally sound.
This creates the following resale dynamics:
For newer properties (0-10 years):
- Building depreciation is the largest value detractor
- Location and land value partially offset losses
- Expect overall value decline unless in prime location
For mid-age properties (10-25 years):
- Building value has declined substantially
- Land value becomes dominant factor
- Renovation may not recover costs in resale
For older properties (25+ years):
- Building often valued at zero
- Price essentially equals land value
- Buyers may plan demolition and rebuild
Strategies to Maximize Resale Value
-
Buy in appreciating land markets — Strong land appreciation can offset building depreciation entirely
-
Consider land ratio — Higher land-to-building ratio means better value retention
-
RC over wooden — Slower depreciation preserves building value longer
-
Target rental returns — Focus on cash flow rather than appreciation in most markets
-
Plan holding period — Understand your expected value at various exit points
Depreciation Strategies for Foreign Investors
Foreign investors can approach depreciation strategically depending on their goals.
Tax Optimization Strategy
For investors prioritizing tax efficiency:
- Purchase older buildings — Modified useful life calculations create larger annual deductions
- Focus on building-heavy properties — Higher building ratio means more depreciable value
- Consider wooden construction — Faster depreciation, larger immediate deductions
- Reinvest tax savings — Use annual tax benefits to acquire additional properties
Warning: Don’t let tax benefits drive poor investment decisions. The underlying fundamentals must work first.
Value Preservation Strategy
For investors prioritizing long-term value:
- Buy RC condominiums — Slower depreciation, sturdier construction
- Target high land ratio — Land value anchors overall property value
- Choose prime locations — Appreciating land markets offset depreciation
- Consider newer buildings — More remaining useful life, better tenant appeal
Balanced Approach
Most successful foreign investors take a middle path:
- Purchase in growing urban markets with land appreciation potential
- Accept moderate depreciation deductions while owning
- Target positive cash flow from rentals
- Plan 10-15 year holding periods
- Accept that some depreciation is normal and manageable
For akiya (vacant house) investment specifically, see our detailed akiya investment guide.
FAQ: Japan Property Depreciation
Why do Japanese houses depreciate so fast?
Japanese buildings depreciate quickly due to a combination of tax code design, cultural preferences, and historical factors. The tax system assigns short statutory useful lives (22 years for wooden houses), which influences market valuations. Culturally, Japanese buyers prefer new construction—only 15% of homes sold are secondhand compared to much higher rates in Western markets. Post-war construction quality issues and frequent building code updates after earthquakes also contribute. However, physical structures can last 65-77 years with maintenance; rapid depreciation reflects accounting and cultural patterns more than structural necessity.
Does land depreciate in Japan?
No. Land cannot be depreciated for tax purposes in Japan. Only the building portion of a property qualifies for depreciation deductions. Land values fluctuate based on market conditions and can appreciate, depreciate, or remain stable depending on location and demand. In 2025, Japan’s national land prices rose 2.7% overall, with Tokyo’s 23 wards seeing residential land increase 7.9%. When evaluating Japanese property, always separate land value (market-determined) from building value (depreciating).
How long does a house last in Japan?
While the average demolition age for Japanese houses is 30 years, this reflects cultural and economic choices rather than structural limits. Research indicates that properly maintained Japanese buildings can remain physically sound for 65-77 years. Many traditional structures have survived centuries. The 30-year figure represents when owners choose to demolish—often to capture rising land values through redevelopment or to build to updated earthquake codes—not when buildings fail structurally.
Can I claim depreciation on rental property in Japan?
Yes. Rental property owners must claim depreciation on the building portion of their property. This depreciation is treated as a “necessary expense” that reduces taxable rental income. The annual depreciation amount depends on building construction type and age. For a new RC condominium, expect approximately 2.1% annual depreciation; for a wooden house, about 4.5%. Depreciation deductions can significantly reduce your tax liability while owning the property, though depreciation recapture may apply when selling.
Do condos depreciate slower than houses in Japan?
Yes. Most condominiums use reinforced concrete (RC) construction with a 47-year statutory useful life, while typical wooden houses have only 22 years. This means condos depreciate at roughly 2.1% annually versus 4.5% for wooden houses. Additionally, condominiums are typically located in urban areas with stronger land appreciation, further supporting overall property values. Tokyo condos have actually appreciated in recent years despite building depreciation, as rising land values more than offset the declining building component.
Property depreciation in Japan operates differently than in Western markets. Understanding the land-versus-building split, statutory useful life periods, and tax implications helps foreign investors make informed decisions. Focus on location quality, construction type, and rental fundamentals rather than fearing depreciation—it’s a manageable factor that informed investors can turn into a tax advantage.