The pricing is set by the marginal housing. Marginal housing is older tiny apartments that would be considered deathtraps in the US or Europe. Those older 7 story buildings are torn down and replaced with 30+ story apartments (in less corrupt ways than in the past at densities that most other countries would consider too high) which are unaffordable to the people who are forced to leave and commute long distances to newer/safer, but similarly high density housing.

Because ALL of the jobs are in Tokyo (or Osaka, or Fukuoka). Note that Chiba city is growing faster than Tokyo and it's a suburb (same with Tsukuba)! Shin-Yokohama is getting too expensive.

Meanwhile in western countries the prices go up for no reason! That 30 year old house? It's worth double what it was 10 years ago! And now it's a 30 year old house instead of a 20 year old house. This is reality where I grew up. Most of my peers are priced out too. And I grew up out of the city centre...

And interest rates went from 20% in 1980 to 2% in 2021. Like fashion bags and NFTs they were financialized. The market can remain irrational longer than you can remain solvent. Seen China and the massive building there, but it didn't lower prices... they're higher than SF or NY!

It's not just housing. Look at bare land or abandoned buildings in CA. Those also grew by similar amounts or even more! Why develop it when it goes up in value? Why not own multiple empty homes when they "only" go up in price. Well, welcome to higher interest rates and likely a less deflationary world (deglobalization) with non-wage inflation that prevents the Fed put.

Interest rates don’t really matter to housing prices when supply and demand are at equilibrium. It may shift that equilibrium point but Japan has had the same exact interest rate policy as the US over the same time period but the price of a house in Japan hasn’t increased in nominal terms since 1990.

Everything you point out isn’t driven by interest rates but instead by artificial supply constraints on housing.

Well, actually Japan's interest rates haven't been falling they have been below the inflation rate (eg mostly below 1) for the last 30 years. That is literally the lost 3 decades since 89, when they had a huge housing crash.

https://tradingeconomics.com/japan/interest-rate

No housing is not a financial asset in Japan.

However, China where they have built massive quantities of housing, it is an exceptionally expensive financialized asset, because that is where lending went.

Housing isn’t a financial asset in Japan because you can build as much as you need so it doesn’t appreciate. Once supply caught up and overshot in china prices plummeted. It really is that simple.

I don't want to be too combative here, but Kurthr's comments are completely unrelated to the sentiment of most people in Japan. I don't know where they came from. I lived in Tokyo for years and still have an apartment there. You can work part time for minimum wage and still afford an apartment you can live in comfortably.

It's not going to be a US-style giant house with a green lawn, but it isn't some dystopian hole in the wall or giant share-house like non-wealthy San Francisco residents are stuck in.

You can fire up Netflix and watch some of "The Full-Time Wife Escapist" on there to see a normal small apartment in action. It's tiny by US standards, but people can live there comfortably.