Japan is experiencing a rapid population decline and aging, necessitating new mechanisms for effective land-use planning and urban contraction. A critical issue is urban spongification, where vacant land and houses randomly appear, complicating collective redevelopment. To address this, we developed a spatial analysis method using local population data to identify partially low population-density areas as potential sites of urban spongification. This study examines spatial variations in local population distributions over the past 25 years, comparing data from 1995 to 2020. The number of low-density areas increases with population decline, accompanied by a decrease in their population densities. Using Geographical and Temporal Weighted Regression (GTWR), we analyse how these areas’ economic impacts have evolved. Results indicate that since around 2000, the size of low-density areas has become increasingly significant in explaining land prices, with a clear negative influence on them over time.