Important Questions to Consider Regarding Home Ownership

[ricardo]

I think Ben’s point was that there is no ‘housing market’ in the way we think about it in some other countries.

[RetireJapan]

Indeed! Particularly in Japan I think it would be foolish to try to predict house/land prices in the medium- to long-term.

Instead think of it as a way to set your rent at a low-ish level for a period of twenty-five years or so. If that sounds good then by all means buy something you like and can afford.

If not you might be better off renting

[mighty58]

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?

You're likely referring to those properties that are under the 旧法 (old law), where you do indeed only own the house and pay a separate monthly fee to use the land for a period that's usually 20-30 years, and then usually renews. Often the location is desirable, and thus you can live there a lot cheaper than needing to buy the land, but it's certainly not "cheap" as you'll generally need to pay several thousand-man more than the actual value of the house.

Looking through property listings these often catch my eye because of a seemingly cheap price vis-a-vis location, but these "too cheap to be true" listings invariably have 旧法 in the small print.

Not disclosing that to a buyer would be outright fraud though.

[robster]

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.

I have no idea how land prices will be affected, but I have heard from multiple sources that construction costs will be higher from now until the Olympics, and then return to normal after, since the preparations are causing a shortage of builders.

[Kiyora999]

I have a related question:

With all the disasters we had this summer, I'm really worried about my house buying project.
If I buy an 5-10 year-old house, is it really likely to go down with a big earthquake in the next few years?? Or are the houses built for long-time earthquake resistance? Is there even a way to check the earthquake resistance system before buying?
My uncle says that for bridges they have system to detect if the solidity is going down, so he thinks there should be such thing for earthquake tolerance check.

I was talking with a co-worker from HK the other day and he was super surprised that I actually wanted a house and not an apartment in Japan.
Because according to him, houses have high chances to go be destroyed by earthquakes, but not big buildings.

I don't really know if this is accurate, but I indeed feel safe at work...
Is that really the same for houses?

Up until now I only considered buying a house next year because I don't want to hear neighbors and stuff, I want to have space and do what I want in my house...
But if it's destroyed easily maybe it's not the best I don't know...

Is insurance covering fully natural disasters?

Thank you in advance for your help!

[ricardo]

Modern houses are built to pretty high standards. Ask for details.

My house has four shock absorbers built into the walls. Cost several ¥100,000 but worth it for peace of mind.

It’s also build on foundations piled several meters down onto solid rock.

I’m fully insured.

[RetireJapan]

Most modern (last 15-20 years or so?) are built to good earthquake standards. More important than the house perhaps is the area -is it solid bedrock or reclaimed swampland?

Also landslides are a big risk for some places.

Insurance can be iffy -the conditions to receive a payout can be stricter than you might like. Check the terms and conditions carefully.

[TokyoWart]

I bought a home and land in Tokyo in 2001. I did not then have PR and my wife is not Japanese so it was very hard to get a mortgage, but I was eventually able to do so through connections in my company. Last year I had the home and land appraised and the home had lost over half it's value while the land had increased slightly in value in a way which makes me think I would just about break even if I sold now. I think if I had bought outside Tokyo (I am right in the middle of the city) or bought a "mansion" (apartment) I'd have lost money on my purchase price. (In contrast a friend who moved to Manhattan at the same time and bought an apartment has since seen it triple in value.) If you ignore opportunity cost, I think I've saved money by buying because I was paying a lot of rent and contract renewal fees and I'm in a larger living space by having the home. I would recommend a potential buyer only looks at areas which at least come close to keeping their value because as Japan's population shrinks it's hard to imagine real estate increasing in value or the countryside becoming repopulated. I would also avoid anything that locks you into a long commute or other inconveniences because unlike the US you can't plan on selling and buying again every few years as your income increases. It also seems to me that a retail buyer (especially a foreigner) is at a bit of a disadvantage relative to the real estate agents. In the US you could buy your home for about what you can sell it, minus real estate agent fees. In Japan, where there is much less transparency on current prices, you deal with real estate agent fees and some consumer-unfriendly pricing both when you want to sell and when you buy.

[DragonAsh]

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!

I lived and worked in central London during that time, and that's...er, not entirely correct. It was mayhem - in a good sense - for the entire duration, although this may have only been around the main venues. In those areas, nobody would say transport ran 'smoothly'. London traffic was even crazier than usual the entire time (I experienced this first-hand almost every day of the Olympics). It was pretty crazy - but like I said, in a good sense; most everyone was in good spirits; the Olympics were a fun time. I think overall visitor numbers may have been down slightly - especially visitors to London from within the UK, vs overseas visitors - but IIRC the visitors London had spent quite a bit more overall. I'm sure some shops/attractions may have been hurt depending on their location, but as a whole, I recall seeing stats that indicated a 10% increase in total tourist spend.

In the US you could buy your home for about what you can sell it, minus real estate agent fees. In Japan, where there is much less transparency on current prices, you deal with real estate agent fees and some consumer-unfriendly pricing both when you want to sell and when you buy.

I've purchased property in the US, Hong Kong and Japan, and found no significant difference in fees or transparency. If you speak Japanese in particular, Japanese real estate agent fees are quite transparent - some of the issue is that some of the fees (such as recordign fes, stamp and real estate register fees etc). and such that come up may not have any direct equivalents in overseas markets. Certainly real estate agent fees are a given no matter when/where you buy or sell.

You can avoid certain fees by being selective in the properties you look at. If you purchase properties through a real estate agent that the agent owns - far more common than people realize - you don't have to pay real estate agent fees (because it's not a brokered sale, the agent owns the property he/she's selling) and you don't have to pay any consumption tax on the building or the real estate agent fees etc. We purchased our house that way and paid a pittance in extra fees - like 1% or so of the purchase price? Can't remember - vs the 7-10% that can be added on otherwise. We also didn't need to pay mortgage insurance (no mortgage) which saved another 1-2%.

Be a bit patient Being a bit patient and finding the right house in a good spot can save you tens of thousands of dollars.

[DragonAsh]

Nm