We all say it, and we worry about it too: we are an aging society, and that’s going to have repercussions. In Canada, the median age of the population is now close to 41 while in the U.S. it is still-youthful 37ish but rising (according to the last census, seven states have a median age above 40). We can see some of the effects of this already: stores are stocking more reading glasses these days (Costco sells them in blister packs of three, just so you know) and seniors centers are getting more crowded. But that’s all early-days-of-aging stuff. If you really want to know what can happen when a society gets old, you need to look eastward, and specifically to Japan.
Japan is the canary in the coal mine for the rest of the world’s aging societies. The median age in the country is 45, and the population is actually dropping as birth rates cannot keep up with deaths. That’s not that unusual by the way: we pretty much have the same thing going on in North America, but we make up for the difference through immigration. Japan is pretty much closed to new entrants, so it is has aged quickly and thoroughly, so much so that entire towns are becoming abandoned.
This article from Bloomberg Business cites analysis by the Nomura Research Institute forecasting that by 2033 about one-third of the housing stock in Japan will be empty. That’s right, not just ‘not in high demand’, but empty. The country is part of the way there already actually: at present there are about 8 million homes have already effectively been abandoned. It’s not exactly boom times for the real estate industry.
Still, as much as there are parallels between North America and Japan, there are differences as well. About half of Japanese houses are typically built out of wood and not expected to last more than a couple of decades anyway. From a North American perspective that seems puzzling, but it has to do with (what seems like) a bizarre tax policy that depreciates the value of homes to zero in twenty years. According to Bloomberg, that has led to only about 15 percent of sales being in the secondary market, as compared to close to 90 percent in the U.S..
Maybe what Japan shows us is not just the economic havoc that demographics can wreck, but the havoc it can wreck when not accompanied by good economic policy. If the Japanese government had wanted to avoid ghost towns, tax policy should have been shifted years ago (and arguably immigration policy as well).
Let’s keep an eye on Japan’s economy and the way that it changes the next few years. Japan is not exactly a blueprint for the way that North America is headed, but it could be a cautionary tale of things we need to avoid.