The End of Luxury Holiday Homes as the Rich Age?

In a small coastal town three hours drive from Tokyo, a beautiful two-lane wind through seaside hills overlooking remote beaches barely visited by tourists. Mostly uninhabited, the winding road is home to few occasional gated housing compounds, cordoned off from public views with high concrete walls and dense canopies of palm trees. Only by walking higher up the hills, away from the road, one can see what are inside the mysterious compounds. They are luxury private homes with large balconies facing the ocean, flanked by Mercedes and BMWs, fronted by meticulously tended gardens, standing in what seems to be the middle of nowhere with a great view.

Japanese millionaires are not usually known for their ostentatious displays of wealth. In Tokyo, they may live in nondescript single homes or tower condominiums, walking down the same shopping streets and malls to eat and shop at the same restaurants and grocery stores. But when they splurge, they clearly do, away from public scrutiny, geographically far away from their center of power in Tokyo's financial and business districts. Just like rich people elsewhere, they want big second homes with a great view, nestled in locations that your average plebian cannot access and may not even know about.

Yet, there is a problem with remotely located residences around the world. Because they are so remote, when emergencies take place, help cannot be immediately provided, putting their wealthy residents in danger. Of course, the richest can call in a helicopter to evacuate the injured and the ill to the nearest hospital in a matter of minutes, but those who are rich, not that rich, are stuck having their servants or even family members drive them to the nearest clinic hours away. For true emergencies, the victims may not have that much time available to be treated and saved.

This problem of how to handle emergencies is especially a grave one in Japan given the advanced aging both among its general population and the rich. Devoid of a robust IT sector that produces young millionaires by the handful, as is the case in China and the US, Japanese millionaires are likely those of legacy industries, manufacturers who made their fortunes over course of decades and now well within the advanced age range where it is not unsurprising to have medical emergencies at any point in time. The seniority of the rich, then, make their ready access to medical care even more important.

As the old rich folks become more prone to emergencies, it calls into question the very wisdom of having a nice home in the middle of nowhere. In any country, the best medical care is to be had in the major urban areas, where the views outside the window may not be so nice, the paparazzi may be much nosier, and everyone except the very rich cannot afford a big piece of prime real estate for high walls, a dense group of palm trees, a garden, and enough parking space for multiple cars. Yet, for the old rich folks to survive, they may need to downgrade their homes a little bit so that they remain in the big city.

But as old rich folks opt out of luxury second homes in remote corners of Japan, declining provincial areas of Japan lose another way to keep themselves financially afloat. Some towns in Japan, like the highlands town of Karuizawa, have in the past made a name for themselves as a premier destination for rich Tokyoites to build holiday homes surrounded by nature. While these towns can certainly double down on investments in healthcare and other public goods seniors need to continue attracting the rich to come and stay, they are certain to lose real estate and consumption tax revenues even if a small number of them are deterred by remoteness.

Indeed, such a decline in the luxury bedroom towns outside major metropolises can be considered a global trend. In America, gentrification in city centers, transforming them from run-down low-income areas to homes of chic restaurants, designer shops, and apartments mirror the decline of the suburban home as an ideal living situation for middle-class families. As a younger generation value closeness, convenience, and eco-friendliness, the idea of driving hours from work, which remain downtown, and suburban homes become less and less attractive as a way of living.

The way for provincial areas using their rich residents to move forward may is to see it as an opportunity to attract residents of a more regular sort. As the reputation for luxury dissipates, so does artificially inflated land prices, making what used to be luxury areas more affordable to regular people. With their natural attractions that are used to draw rich people intact, these former towns of the rich can now cater to young remote workers seeking to live and work in beautiful natural environments unavailable in big metropolises. As more such workers move in, perhaps public goods like hospitals can follow.