Home affordability decreased for the average income earner in Japan last year. This is according to a data recently released by Tokyo Kantei, which shows that the nationwide income multiple (compared to the average price of a home) increased in 2016, although the rate of increase was less than the previous two years.
The “income multiple” is the ratio of the average price of a home to the average annual income. The lower the multiple, the more affordable it is for the average income-earner to buy a home. The increase in the income multiple last year means that it was less affordable for the average worker to buy a home than in 2015.
In this article, we look at the average list price of a 70-sqm 10-year old re-sale condominium compared to average salaries.
Please note that the data we reported last year looked at the average price of a new 70-sqm condominium, which explains the higher income multiple in that report (due to the higher average price of newly constructed properties).
In 2016, the national “income multiple” was 5.25 for a re-sale condo, which means that the average price of a re-sale condo nationwide was on average 5.25 times the average annual income. The national income multiple for a newly constructed condo was significantly higher, at 7.59.
According to Tokyo Kantei, nationwide, the average annual salary in 2016 was ¥4.36 million ($39,490) and the average price of a re-sale 70-sqm condo was ¥22.88 million yen ($206,500). In 2015, the national income multiple was 5.18, so the 2016 income multiple increased by 1.4% compared to 2015.
In 2016, the income multiple increased in 23 of Japan’s 47 prefectures (versus an increase in 36 of 47 prefectures in 2015), which means that there were more prefectures where home affordability increased last year compared to 2015.
A Median Multiple Above 4.1 Means Housing is “Seriously Unaffordable”
The Median Multiple has been recommended by the World Bank and the United Nations to compare affordability in urban housing markets across countries.
It is calculated by dividing the median house price in a given market by gross annual median household income.
Note that this methodology differs from Tokyo Kantei’s, which uses average prices and incomes, but it is still instructive to compare the two multiples to get a general idea of just how affordable or unaffordable houses are in Japan.
According to the Demographia International Housing Affordability Survey,
— A Median Multiple of 5.1 and over indicates a market that is “severely unaffordable”
— A Median Multiple of 4.1 to 5.0 indicates a market that is “seriously unaffordable”
— A Median Multiple of 3.1 to 4.0 indicates a market that is “moderately unaffordable”
— A Median Multiple of 3.0 and under indicate a market that is “affordable”
Based on the Median Multiple method, buying a re-sale condominium was “seriously unaffordable” in 45 of Japan’s 47 prefectures. Only Yamaguchi and Nara prefectures had multiples that were considered “moderately affordable.”
Please see this article to see a comparison of Japan’s income multiple to the median multiple in other countries: How (unaffordable) is it to buy a home in Japan?
Affordability by Prefecture
In 2016, the three most affordable prefectures to buy a home were (income multiple in parentheses):
- Yamaguchi (3.60)
- Nara (4.00)
- Tochigi (4.11)
The three least affordable prefectures to buy a home were (income multiple in parentheses).
- Tokyo (9.13)
- Okinawa (7.80)
- Kanagawa (7.65)
The following tables show the 2016 income multiple, average annual salary, and average price of a re-sale 70-sqm condo by prefecture and major city.
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