Important Questions to Consider Regarding Home Ownership

[expat2011]

Hello RetireJapan. So many questions, so little time. Before getting on with it, I just want to say how thankful I am to have found a community with people who are in the same boat as me- expats staying in Japan, usually for the long haul, who want to make a sound financial situation for themselves. I am very busy during the week but check the forums as I am able.

Anyways, on with it. My wife and I are not seriously considering home ownership yet- but who doesn't daydream about? Owning a place to call your own, hanging a pullup bar wherever you want, setting down roots... It's all very charming.

But then there's reality. Insurance, the responsibility of maintenance and upkeep, taxes, less flexibility if you decide to move. Renting can sometimes be a pain, especially at the start with all the crappy fees, but it also contains freedom and less responsibility.

So what I'm trying to say here is, what are important questions to ask yourself before buying a home? What's important to consider? Perhaps most importantly, how do you pick between renting (knowing that rent will never come back to you), and buying? Would you agree that home prices in Japan generally go down, and you should view a purchase of a house as something you buy for yourself rather than an investment?

Basically, anything you think that would be useful to consider, please let me know.

Also, I am not partial to new or old houses. To be honest, part of me sometimes daydreams about purchasing a really old house from akiyaBank and fixing it up myself (I am pretty handy).

Thank you!

[RetireJapan]

My three pence:

1. if you consider buying, make sure you are not going to move (hopefully ever, but certainly for 15+ years)
2. make sure you understand all potential costs (mortgage, property tax, maintenance, etc.)
3. buying a 'used' house means that someone else eats the depreciation

We bought an old manshon a couple of years ago and I couldn't be happier: the mortgage + condo fees + property tax only comes to about 60% of the rent for an equivalent place, and we were able to do it up slightly once we bought it. However, I have friends that built a new house only for the earthquake in 2011 to put big cracks in it that weren't covered by insurance. YMMV.

Anyone else?

[ricardo]

My tuppence.....

Buy!

You get the land and the house. You’re in total control.

You’ll always have the land. Mine’s in a great location. (“Location, location, location,” is a universal rule)..

The mortgage is basically an interest free loan because of the base rate and the tax deduction

We bought the land and then designed the house to our exact specifications with the architect

Insurance is negligible if you don’t have gas (really!)

The house will be worth nothing in the future. It’s not an investment

But it’s yours.....

I like all that.....

I like being in control.

[goodandbadjapan]

I'm another in favour of buying but agree with the proviso that you are planning to stay there long term. We bought a second-hand house which meant that the cost was almost all in the land purchase. I think we probably overpaid a bit, but it was in the location we wanted, it is ours to do with as we please and we are not viewing it as an investment. Much is made of the fact that houses lose their value and that is certainly true so buying second-hand is often not a bad idea. As Ben said, someone else has taken a lot of the hit on depreciation. Also, I often hear it said that houses are only built to last 30 years or so here, but they don't suddenly fall down. Barring a big quake (and then I suppose age may well become a factor) they are still quite liveable for a long, long time. Mine was over twenty years old and I have been in it for 12. We've not had any problems so far.

[expat2011]

Thank you all for your tips. One of the problems in all of this is we aren't sure where we'll be in the next five years, let alone fifteen, so for now renting sounds like the way to go. In the future, buying a depreciated house may be on the table.

I've heard that some people bought only a house when they thought they were purchasing both the house and the land. Has anyone heard of this, or been almost swindled?

[ricardo]

That sounds very strange. It’s very clear from all the documentation that the land anf the house are separate purchases, each shown with their own prices on all of the documents etc.

Maybe there could be some situations where you might rent the land and buy the house

[eagleyes]

Perfect timing as I am also considering buying. I don't know how much it applies to other parts of Japan but for Tokyo area do you think it is better to buy before the Olympics or after? The prices have raised by a lot in the recent years but what will happen after?

[RetireJapan]

Perfect timing as I am also considering buying. I don't know how much it applies to other parts of Japan but for Tokyo area do you think it is better to buy before the Olympics or after? The prices have raised by a lot in the recent years but what will happen after?

Impossible to predict. Prices could go up as visitors realise how much they like Tokyo and start buying holiday homes there. Or they could collapse as this whole 'Olympics are coming' frenzy dies out. Or something horrible could happen before the games like an earthquake or terrorist attack. Or aliens could destroy it

I would probably keep an eye out and consider buying something I liked at a price I could afford. Especially in Japan, a home is somewhere you live, probably not an investment (or even speculation).

[ricardo]

Also worth noting that when the Games were held in London the number of visitors went down. Transport ran smoothly. Shops and tourist attractions complained. Everyone had been scared off by the high prices of flights and the lack of hotel accommodation. So it’s a myth that the Olympics attract tourists, at least during the event itself. The only people that came were athletes, officials and ticketed members of the public. Everyone else stayed away!

Doesn’t answer to question about land prices, but it does challenge the myth. I suspect the Games themselves will have no material effect on prices and the usual forces will apply. Remember in Japan you buy the land and then build a disposable house on it, which will depreciate away to zero over time. The value of the house will rarely go up.

[eagleyes]

Thanks to Ben and Ricardo inputs. I think I generally agree with you that buying in Japan is not an investment at least for the house because the value will go down. If I interpret correctly Ben's reply it is difficult to predict and better not to time the housing market. However unlike stocks buying a house is an important investment committing for years. My point was to try to understand if it could be brought cheaper after the olympics rather than before where there is a euphoria.