The Japan prefab market is an outlier, and it’s not just because factory-made housing is more popular there than almost anywhere else. Consumers buy prefab in Japan for very different reasons than in Australia, Europe, or North America.
How Japan prefab became tied to quality rather than affordability is something Western construction professionals need to look at as modular building becomes more and more popular around the world.
In Japan, about a quarter of all new houses are prefabricated. The largest companies competing for a share of this enormous market are Sekisui House, Daiwa House, and Sekisui Heim. Toyota has been manufacturing prefab houses for over 20 years as well, and Muji, Japan’s retail giant, is developing models of its own.
While in Sweden more than 80% of new detached houses are prefab, Japan is unique because its manufacturers aim for wealthy consumers. Independent builders and contractors usually build conventional wooden houses for lower income households.
From 1963 to 2014, manufacturers built 9 million prefab houses in Japan.
However, that doesn’t mean Japan prefab homes are all significantly more expensive than stick-built ones. This Muji model, a relatively affordable one, goes for about $180’000. Consumers pay for extended warranties and other services tied to the homes. The industry’s aggressive marketing and R&D initiatives also add in.
How did Japan prefab homes become a high-end product?
Japanese people rarely live in second-hand homes, in part because they don’t see houses as long-term investments like in the US. Thus, there’s little effort to maintain or add value to them over time. In Japan, a person generally plans to live in his first house his whole life without flipping it.
“By the time the homeowner dies, and a new person is ready to buy or inherit their property, the house would have deteriorated and would likely be knocked down to clear the way for a new home,” said Jiro Yoshida, a professor at Penn State University, on a Freakonomics podcast.
Because Japan’s homeowners prefer to demolish existing structures and erect new ones on top according to their specifications, it’s easy to see how precision in quality and fast construction command a premium. Toyota’s models start at $200,000 and go up to $800,000 (which buys you 2600 square feet). The company sold 5000 homes in 2006, all built in under 45 days and guaranteed for 60 years.
Another more unsettling reason behind Japan’s unique housing market is the Shinto idea of kegare: the belief that a previous resident’s spirit or disease haunts a space after their death. There’s even a class of properties labeled Jikko Bukken, where a previous occupant died of unnatural causes including suicide, murder, fire or neglect. These properties command extremely low prices, and agents must disclose their history to buyers by law.
The fact companies market prefabricated houses through benefits other than price competitiveness in Japan has meant a large, varied selection of residential prefabs available to the public. As consumers in other countries move away from the perception of prefab as suitable for only low-cost, emergency housing, we can expect to see more prefab models like this one in Australia or California, whose price tags or quality wouldn’t surprise someone in Japan.