Japan's Luxury Residential Market — and What It Suggests About Korea's
Japan's luxury residential market rests on two structural axes that have no direct equivalent in Korea.
The first is the separation of land and building. In Japan, buildings depreciate. Wooden structures reach a tax-assessed value of near zero at twenty-two years; reinforced concrete at forty-seven. The value of a high-end Japanese residence concentrates not in the building but in the land and its address. It is why land prices in Azabu, Shirogane, and Den-en-chōfu hold regardless of what stands on them. This structure allows buildings to be constructed entirely to the owner's preference — and demolished and rebuilt every few decades as a matter of course. It is the foundation on which spatial individuality accumulates.
Both Korea and Japan recognise building depreciation in their tax codes. What differs is what happens in the market. In Japan, that depreciation is reflected directly in transaction prices. A twenty-year-old detached house is treated as having near-zero building value; it sells for land only, and buyers accept this without question. Korea is different. A thirty-year-old Gangnam apartment can trade above a newly completed one. Reconstruction expectations, address, and school district override the discount that age might otherwise impose. What determines the price is not the physical structure but the rights and expectations attached to the site.
In the end, neither country buys buildings. Japan buys land. Korea buys the expectations that sit above it. A conclusion that appears similar produces two entirely different markets.
Japan's logic rewards individuality. Because a building will eventually be replaced, it can be built to personal taste without penalty. Architect-designed houses, narrow-lot constructions, craft-based residential culture — these grow from this soil. Korea's logic rewards liquidity. A building that will eventually be sold must remain legible to the widest possible buyer. Building unusually makes resale harder. So everyone builds similarly, similar floor plans are preferred, and the result is the uniformity of the apartment.
The second structural axis is the craft ecosystem. Japan's high-end residential market sustains architects working directly with private clients, lighting designers, furniture makers, landscape specialists, and interior joinery craftsmen — all operating at a mid-scale, independent level. They work not for large apartment developers but for individual building owners. Demand sustains supply; supply raises standards. The virtuous cycle runs quietly. Kyoto's machiya renovation culture and Tokyo's narrow-lot housing movement are what this ecosystem looks like from the outside. The market beneath is considerably quieter and more durable.
The third structural axis is the inflow of international demand. Through the 2020s, sustained yen weakness has drawn capital from Hong Kong, Singapore, and the United States into high-end residential acquisitions in Minato and Shibuya. The price levels this demand has established cannot be explained by domestic Japanese purchasing power alone. The market has internationalised, and in doing so has shifted the price floor.
How Korea may follow — my reading
My reading is as follows.
The first condition is deregulation.
As long as the 245-square-metre area threshold remains in force, Korea's high-end residential market cannot grow beyond a certain size. Just as Japan levies tax on value rather than space, Korea will eventually need to move in that direction. It is a politically sensitive area, however, and progress will not come quickly. If change begins within the next ten years, that will be considered fast.
The quiet return of the private house.
Something is shifting quietly in Korea. The high-end detached house market in Hannam-dong, Seongbuk-dong, and Pyeongchang-dong has begun to move again. A segment of buyers is emerging that wants space outside the apartment framework, and a younger generation of architects is positioning itself to serve that demand. The numbers are still small, but the direction resembles what Japan passed through in the 1980s and 1990s.
Japan's 1980s were the bubble economy. Land prices and equity values surged simultaneously, and wealth concentrated rapidly. For the first time, those who held that wealth began to ask seriously how they wanted to live — not merely what they wanted to own. It was the first appearance of a generation for whom the problem of subsistence had already been solved.
Three things happened at once. Architect-designed residential culture exploded. Tadao Ando, Toyo Ito, and Kengo Kuma made their reputations on private residential commissions in this period. Building owners began seeking architects directly rather than large construction firms. The interior and furniture industry deepened. Cassina Japan and Vitra Japan entered Tokyo; domestically, Maruni and Karimoku strengthened their high-end lines. Magazines and media shaped residential culture. Casa BRUTUS and a generation of spatial culture publications were founded or expanded in this period. Readers raised their standards for their own homes through these pages, and those standards in turn lifted the market.
When the bubble collapsed in the early 1990s, the excess departed — but the sensibility remained. The compact-house movement is its residue: a culture of precise, considered space that survived the economy that produced it.
What is happening in Korea now is quieter and slower. The catalyst is weaker, and so the pace is different. Clients seeking named architects have increased. Architect-commissioned detached house projects in Hannam-dong, Seongbuk-dong, and Pyeongchang-dong are meaningfully more numerous than they were ten years ago. Furniture and lighting edit shops in Seongsu-dong, interior galleries in Hannam-dong, are beginning to serve this demand. Younger building owners are raising their expectations through Instagram and YouTube, the way Japanese readers once raised theirs through print. The role that magazines played in Japan, social media is now playing in Korea.
As long as the 245-square-metre regulation remains, this shift will concentrate in the detached house market. Paradoxically, that is one reason Hannam-dong, Seongbuk-dong, and Pyeongchang-dong are likely to attract more serious attention in the years ahead.
What the lost decades made possible.
There is a paradox embedded in Japan's post-bubble history that is worth stating directly.
At the peak of the bubble in the late 1980s, a single square metre in Tokyo's Ginza was valued above comparable space in Manhattan. Total Tokyo real estate was estimated to exceed the entire property value of the United States. Banks extended loans against projected future appreciation — pricing in a future that had not yet arrived. It was an era in which forward value was treated as collateral.
When the Bank of Japan raised rates in 1989, that premise collapsed. Urban land prices fell approximately seventy percent from their peak, and the decline did not stop. National average land prices did not register a year-on-year increase until 2018 — nearly thirty years after the bubble's peak. Consumer prices were effectively frozen for more than twenty years. It was a period in which the economy appeared to have stopped.
Where Korean households absorbed, over the same period, the lesson that real estate always rises, Japanese households absorbed the opposite: that it falls, that leverage is dangerous, that buying is a commitment to be made with care. That fear ran through an entire generation.
And yet it was precisely this devastation that produced a paradoxical environment. In a market where making money from real estate had become impossible, the government had no choice but to rely on development to revive the city. Not restricting development through regulation, but restoring the city centre through development. Japan's Urban Renaissance Special Measures Act of 2002 was the product of that shift — a deliberate deregulation of urban planning and land use that opened the door for large-scale private mixed-use development. The government lowered the barriers. Mori Building walked through.
Roppongi Hills is the work of Mori Building Co., Ltd. (森ビル株式会社) — Japan's leading urban landscape developer, and the company most closely identified with large-scale integrated urban redevelopment. After Tokyo Metropolitan Government designated the Roppongi 6-chome district a redevelopment inducement area in 1986, Mori Building spent seventeen years negotiating with approximately four hundred landholders to bring the project to completion. It opened in 2003. The complex — office, residential, hotel, museum, outdoor amphitheatre, television studio — was not a real estate project in the conventional sense. It was an argument for a different kind of city. Industry observers still note that Roppongi Hills required the particular character of its developer to reach completion. Negotiating four hundred landholders over seventeen years is not a task that financial logic alone sustains. It requires a conviction that extends beyond the return calculation.
Azabudai Hills, also Mori Building, required longer. The redevelopment council was established in 1989. Final completion came in 2025, after thirty-five years of engagement with approximately three hundred rights holders across an 8.1-hectare site of deteriorating low-rise wooden structures. Roppongi Hills: seventeen years. Azabudai Hills: thirty-five years. The combined development time for two projects by one company exceeds half a century.
While Seoul's upper residential market remained constrained by area-based regulation drawn from a 1970s policy logic, Tokyo was using the long aftermath of its property collapse to redesign its most central districts with a depth and ambition that the boom years had not attempted.
The third condition: international demand.
For Korea's luxury residential market to mature in any meaningful sense, the shift in domestic demand alone will not be sufficient. When high-income foreign residents — corporate executives on international postings, foreign investors resident in Korea, overseas Koreans — begin to choose Korea's high-end residential market consistently, that demand raises the standard of the market itself. The rising foreign resident proportion at Hannam The Hill and Nine One Hannam is already a signal of that movement.
Following Japan directly is not simple. Japan's high-end residential culture was formed over a hundred and fifty years of collision and synthesis between Western architectural influence and traditional timber craft. Korea did not have that time, and the apartment republic filled the space quickly.
But there is one area where Korea holds an advantage over Japan. Speed. Korea changes fast. Ten years can alter the character of a market entirely. The possibility that Korea compresses into ten years what Japan built over thirty is real.
That ten years is beginning now.
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