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Buying property in Japan

anpan

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Yes, I know that I can purchase real estate property through foreclosures at affordable price.
Surely many people are living there and some of them are working there.
But, I think that many of them are working or going to their school at urban area, at least Ikebukuro.
If you can find job near Hanno, it is lucky. You do not have to buy expensive real estate.

It takes 47 minutes from Hanno (飯能 in saitama prefecture) to Ikebukuro by train.
Some people think that this commuting time is too long. But, average commuting time in Japan is about 1 hour.
So, some people can accept this 47 minutes.
As for foreclosure, it is problem that I can not inspect inside the house before purchasing it.
There is possibility that all floors are rotten, there are a lot of leaks from ceiling.
That's why I can purchase it at cheap price.
At least I should prospect these risks and take these points into account and decide bidding price.
 

Shouganai

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It is true that for some a 47min commute is too long, as even Ikebukuro might not be even the end of line, but require a subway connection. But actually 47minutes is not too bad, and it can always be a rental property. There are some big centres like Tokorazawa and Nerima closer still. There are also smaller cities like Sendai that might appeal for lifestyle reasons. There are also properties closer - I just liked the fact that Hanno has mountains, rivers, modern services, large centre. It is also end of line, so I always get a seat going to the city. I might have to wait for a 2nd train, or until I get to Tokorazawa before I can sit down at peak hour.
I think there are too many fears about foreclosed. The photos provided by the courts are very representative of the property. They actually focus on the flaws of the property. The only type of flaw they don't seem to capture is with old rural property; where property boundaries are incorrectly titled, or not surveyed property. But if you buy in a subdivision, you should be safe. I was surprised at the quality of housing. You can see if people are dirty from the photos, or if there is structural issues. Leaks will be evident from damage. The seller has no interest in improving to hide the quality - because its a bank sale. That's better dynamic than a private sale. Actually, you can get at a cheap price because of "perception" of risk in risk-averse Japan. The reality is not as bad as you might think. On our 2nd property, there was nominal flood damage. I just mixed paint, and it looks the same. Surprise surprise! The previous owner warned us about pine needles filling the gutter, causing the inside flooding. It only happened to him once because he learned.
Yes, of course you need to understand the risks. ...not avoid them....because you avoid one of life's great opportunities. The other is to buy property at the cost of a few months salary.
 

anpan

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When you purchase a real estate in Japan, you have to pay a ツ“purchase tax = acquisition tax = shutoku zei= 窶「s窶慊ョナスYナステヲ窶慊セツ静?”.
Even if you purchase it through foreclosure, you have to do.
In order to calculate this tax, I have to get ツ“certificate of valuation of fixed asset = Hyoka-shomeiツ” issued from Japanese government.
In case of property within 23 wards in Tokyo, this certificate is issued from Tozei jimusho.
Only owner of property or an agent who has a letter of attorney can get this certificate.
In case of foreclosed property, in some cases assessed value is written in documents issued from court house.
Fortunately, I have this certificate in the same building.
kamatahigashihyoka1.jpg
This certificate is not for room 101. But, this is for same building. So, I can prospect assessed value of room 101.
According to my documents, assessed value (Hyoka gaku) of this room is 53,329 USD .
This assessed value differs depending on rooms.
Especially when room area becomes wider, the assessed value will be higher.
But, the room area of this certificate and room area of room 101 does not have a big difference.
Therefore, I use this assessed value for room 101.
Furthermore, I have certificate of assessed value of the lot.
Accoding to this certificate, assessed value of lot will be around 219,330,140 JPY ツ?? 2,193,301 USD
This lot is owned by all owners of this building.
So, when I calculate the tax amount for one owner, calculation formula is as below.
2,193,301 USD ツ× percentage of seller’s ownership on a lot.
According to my documents, assessed value of this owner will be 138,500 USD.
Tax rate of purchase tax is 3% in case of residential property.
If the building is a commercial property, tax rate is 4%.
And there is a Tax reduction measures (Genzei sochi = ナ陳クツ静??麓窶冰)
As for the land, half of assessed value is taxable value.
The calculaion formula for purchase tax is as below.
House : 53,329 USD ツ× 3% = 1599.87 USD
Lot : 138,500 USD ツ×ツ 0.5 ツ× 3% = 2077.5 USD
Thus, 1599.87 USD + 2077.5 USD = 3677.37 USD ————————— 窶。B
 

anpan

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Purchase tax (Shutoku zei) in real estate and tax reduction measures.

Hello, Today, I want to explain about Purchase tax (Shutoku zei) in real estate and tax reduction measures.

As for purchase tax, there is another Tax reduction measures.
First as for the house.
Amount of purchase tax = (assessed value – deductible amount ) ツ× 3%

Deductible amount differs depending on the date of completion or built.
This is in the case of Tokyo prefecture.
Deductible amount differs on prefecture.

Date of built ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ Deductible amount
after April 1st, 1997 ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ USD 120,000
April 1st, 1989~March 31th,1997 ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ USD 100,000
July 1st, 1985~March 31th,1989 ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ ツ USD 45,000
January 1st,1982 ~ June 30th,1985 ツ ツ ツ ツ ツ ツ ツ ツ ツ USD 42,000

This deduction is applicable for buyer’s residence.
So, when the apartment is an office, warehouse, this deduction is not applicable.
When someone buys the house to rent out, this deduction is not applicable.

There are other conditions to use tax reduction meaures.

The room area written on the certificate of assessed value should be within 50 ~ 240 square meters .

In case of apartment made of concrete, it should be built within 25 years.
In case of house made of wood, it should be built within 20 years.

So, in case of room 101, this deduction is applicable.

(53,329 USD - 120,000 USD ) ツ× 3% is below zero
The buyer does not need to pay purchase tax as for the house.

Next, I will explain about the purchase tax on a Lot.
When you buy this apartment, you can obtain property right (Shoyu-ken = ツ焦?窶猫ナ陳?) on the lot.
Buyer can obtain share (mochibun = ナスツ昶?「ツェ) of property right on a lot.

Amount of purchase tax on lot = (assessed value ツ× 0.5 ツ× 3%) - deductible amount (whichever is higher in 窶堋? and 窶堋「))

窶堋? = 450 USD
窶堋「 = ( assessed value per 1 窶。u ツ× 0.5 ) ツ× (room area written on certificate of assessed value ( maximum figure is 200 窶。u) ツ× 2 ) ツ×3%

So, in case of this property,
USD2,193,301 ( Assessed value ) / 1003.72 窶。u ) ツ× 0.5 ツ× ( 70.2 square meters ツ× 2 ) ツ× 3%
= USD 4,601

So, 窶堋「 is higher and 4,601 USD is applicable.
2077.5 USD - 4,601 USD is below zero

So, buyer does not need to for the pay purchase tax as for a lot.
 

Dotanbatan

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Thank you for explaining the tax considerations so well Anpan. We are looking into the potential of buying to let at the moment.
 

anpan

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Hello, Dotanbatan.

Next, I will explain about registration tax ( Toroku menkyo zei = 登録免許税 ).
Real Estate buyer has to pay registration tax for title transfer.

In case of this apartment, calculation formula will be as below.

House : 53,329 USD x 2 % = 1066.58 USD
Lot : 138,500 USD x 1.5% = 2077.5 USD
So, registration tax will be 3144.08 USD ————————— ④

If you buy this apartment for your residence, and acquire necessary certificate called Jutaku-yo Kaoku shomei sho (住宅用家屋証明書) issued from city hall, you can use tax reduction measures.

House : 53,329 USD x 0.3 % = 159.987 USD
Lot : 138,500 USD x 1.5% = 2077.5 USD
So, registration tax will be 2237.487 USD

And as for registration process, you will hire a judicial scrivener (Shiho-shoshi lawyer = 司法書士. This is my profession).
Their fee deffers depends on the judicial scrivener.
Their fee will be within 1,000 ~ 2,000 USD.
Generally, when the office is larger, their fee will be higher.
Here, I assume their fee is USD 2,000. ————————— ⑤
(Of course, if you would hire me as judicial scrivener, my fee is below 1,000 USD.)
 

anpan

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Property tax ( Kotei shisan zei = ナ津??凖ィナス窶佛スYツ静?

Next, I will explain about Property tax ( Kotei shisan zei = ナ津??凖ィナス窶佛スYツ静?.

When you own a real estate in Japan as of January 1st, you have to pay a property tax (ナ津??凖ィナス窶佛スYツ静??≫?堋ア窶堙??堋「窶堋オ窶堋ウ窶堙ア窶堋コ窶堋「) to Japanese government.

When you buy a real estate at August 15th, 2014, you are not the owner as of January 1st 2014.

So, you do not receive a bill from Japanese government until 2015.
Japanese government sends bill after they confirm the owner as of January 1st.
When Japanese government knows that you are the new owner as of January 1st 2015, they will send bill to you around April 2015.

Even if you do not have Japanese nationality and/or address in Japan, you still have to pay property tax.
Some of you would say that you have real estate in Japan, but you have not paid property tax in Japan.
However, it is because you do not know about the tax law in Japan.
Japanese government knows that you have a real estate.
And if you do not pay property tax, they can seize your real estate without your permit.
Tax rate of property tax is 1.4% of valuation of fixed asset.

And if you have a real estate in an area designated for urbanization (Shigaika Kuiki = ), you also have to pay city planning tax (Toshi keikaku zei = 窶徭ナスsナ致窶ーテヲツ静?.
Room 101 is located in an area designated for urbanization.
So, if you buy this room 101, you have to pay the city planning tax.
Tax rate of city planning tax is 0.3% of valuation of fixed asset.

Property tax + city planning tax =
(1.4% + 0.3%) x (53,329 USD + 138,500 USD ) = 3,261 USD
So, in case of ツ“room 101ツ?? owner has to pay 3,261 USD once a year.—————————窶。E
 

anpan

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Good evening.

Next, I will explain about Stamp duty ( Inshi zei = 印紙税).

When you purchase real estate in Japan through Real Estate Company , they will make real estate sales contract sheet.
They will make 2 sheets of contract. The buyer and the seller will sign their address, name and if they have an affix seal.

On this contract, buyer and seller attach and paste revenue stamp(収入印紙= Shu nyu Inshi).
Buyer and seller or realtor goes to post office to buy a revenue stamp and they paste the stamp on the contract and affix the stamp on the revenue stamp.
Please take a look at picture below.
revenuestamp.jpg

revenue stamp on sales contract of real estate in Japan

The amount of stamp duty is different from sales price.
(There is tax reduction until 2018.These figure reflects this tax reduction.)

Described sales amount      Tax amount
From $10,001 to $50000        $10
From $50001 to $100,000       $50
From $100,001 to $500,000      $100
From $500,001 to $1,000,000      $300

So, as for room 101 , sales price is 338,000 USD, buyer and seller have to buy revenue stamp of $100.--------------------------- ⑦
This duty does not affect validity of sales contract itself.
But, if persons do not attach revenue stamp, and if tax office notices the nnegligence, persons have to pay 3 times amount as penalty. In this case, it is $300.

When the person attached the revenue stamp but did not affix seal and signature on the stamp, persons have to pay same amount to stipulated as penalty. In this case, it is 100 USD.
 

anpan

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Apartment Management Fee

Next, I will explain about Apartment Management Fee (Kanrihi= ナ?テ??板昶?敕ッ), and reserve fund for repair (Shuzen Tsumitate kin = ツ修窶篭ツ静鞘?板ァ窶ケテ?)ツ .

In case of room 101, Apartment Management Fee is 146 USD per a month.
Reserve fund for repair is 189.6 USD per month.
So, (146 USD + 189.6 USD) ツ× 12 months = 4027.2 USD per a year ————————— 窶。G
 

anpan

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Next, I will calculate cost to rent “room 101″.
According to advertisement from Real Estate Company, rental fee will be 1,600 USD per month.

When you rent this apartment you will pay fee for the realtor.
It will be 1,600 USD.

And you will pay a gift money (Reikin= 礼金)for owner of 1,600USD.
Though you will pay a key money ( Shiki kin = 敷金) of 1,600 USD, generally it will be refundable.
Generally the rental period is 2 years.
When you renew the lease contract, you have to have a realtor make new lease contract.
And you will have to pay 1,600 USD.
 

anpan

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price changes of apartment by ages in Japan

Now, I will compare cost between buying room 101 and renting room 101.
Cost of buying room 101
This time, I assume that you buy this property at August 15th, 2014 and sell it August 15th, 2024.
When you sell room 101, you can receive money from the next buyer.
You own this apartment for 10 years.
I have to prospect how much percent the market price of room 101 decrease within 10 years.
apartment and age price changes.jpg
This is diagram that explains chages of an apartment price.
Price of Newly built apartment = 100%, and classifed into ages of building.
In comparison with age 6ツ〜11 and age 16ツ〜20 apartment, price gap is about 20%.
On the other hand, in comparison with age 16ツ〜20 and age 26ツ〜30 apartment, the price gap is about 5%.
So, I assume that there will be 10% decrease within 10 years.
ツ(Capital lossツ)338,000 USD x 10% = 33,800 USD————————— 窶。H
 

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anpan

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Hello,

When you sell room 101, you also have to pay a realtor fee.
The fee will be ツ{ (304,200 USD ツ× 3%)+ 600 USD ツ}ツ× 1.1 = 10,698 USD —————————ツ 窶。I

When you sell your real estate property, you do not need to pay fee for a judicial scrivener.
But, if you have changed your legal domicile after the purchase the apartment, or you bought the apartment and used loan, you need to pay fee for a judicial scrivener.

Moreover, many of owners will buy the fire insuarance when they buy real estate property.
Generally the cost will be 150 USD per a year.———————— 窶。J

So, the costs to buy room 101 and sell it are as below.

11,599 USD ————————— 窶。A
3677.37 USD ————————— 窶。B
3144.08 USD ————————— 窶。C
2,000 USD ————————— 窶。D
3,261 USD once a year ツ× 10 years = 32,610 USD ————————— 窶。E#
100 USD ————————— 窶。F
4027.2 USD per a year ツ× 10 years = 40,272 USD ————————— 窶。G#
33,800 USD ————————— 窶。H
10,698 USD ————————— 窶。I
150 USD per a year ツ× 10 years = 1,500 USD———————— 窶。J#

IN TOTAL OF BUYING 139400.45 USD
 

anpan

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When you rent this room 101 in August 15th, 2014, you pay a realtor fee 1,600 USD ———————— 窶。K

Gift money = 1,600 USD ————————窶。L

Rent from August 15th, 2014 to August 31th, 2014 = 1,600 USD / 31 days ツ×ツ 17 days = 8774.1 USD———————— 窶。M

Rent from September 1st 2014 to July 31st 2024 = 1,600 USD ツ× 119 months = 190,400 USD———————— 窶。N

Rent from August 1st 2024 to August 15th, 2024 = 774 USD———————— 窶。O

You have to renew the lease contract at August 2016, 2018,2020, 2022 and have to pay fee for the realtor.
1,600 USD ツ× 4 = 6,400 USD————————窶。P

IN TOTAL OF RENTING ツ ツ 203,148 USD

According to this calculation buying an apartment is better than renting it.

I know that this is special situation because ordinary people do not have a cash of 338,000 USD .
So, they will try to borrow money from bank.

I will calculate in case of such situation.
 

HanSolo

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Thanks for posting this, Anpan.
Given the relatively low price of apartments compared to the rent, plus the irritating lack of short-term leases (2 year seems to be the norm), I was thinking it would just be easier to buy an apartment and sell it again later.

However, those buy & sell losses are insane. To the extent that the actual purchase price of the apartment is a secondary thought. Whatever happened to 'I want to buy your apartment', 'OK give me money', finished? What a bunch of parasites. Sickening.
 

Shouganai

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Thanks for posting this, Anpan.
Given the relatively low price of apartments compared to the rent, plus the irritating lack of short-term leases (2 year seems to be the norm), I was thinking it would just be easier to buy an apartment and sell it again later.
the capital gains taxes are pretty hefty if you simply flip, but certainly you can plan that aspect of it, so it makes commercial sense.
 

cocoichi

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This topic is very interesting. I am planning to move with my wife to Japan in 2017, and we are looking at housing options. First we will rent, but once we are in a better position, we would like to own something. Since my wife is very reluctant to buy a pre-owned house that is older than 10 years, the idea it to buy a small piece of land somewhere near a train station to commute to Osaka. On that land we want to put a prefab house, and I was wondering if anyone has any experience with this, or could point me towards a website where prices of the prefab models are shown?
 

Lothor

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This topic is very interesting. I am planning to move with my wife to Japan in 2017, and we are looking at housing options. First we will rent, but once we are in a better position, we would like to own something. Since my wife is very reluctant to buy a pre-owned house that is older than 10 years, the idea it to buy a small piece of land somewhere near a train station to commute to Osaka. On that land we want to put a prefab house, and I was wondering if anyone has any experience with this, or could point me towards a website where prices of the prefab models are shown?

Hopefully someone with more knowledge of new properties can give a better answer, but in Tokyo the cost of a basic 80-90m2 new house (excluding the land) seems to be about 1200 man. I went round a few new houses earlier this year and they felt rather flimsy and we ended up buying a larger house that was expensive (3000 man) to build at the end of the bubble era that is now worth very little. Too many houses being built seems to be a problem in Tokyo, if it is the same in Osaka, you should be able to get a discount by haggling. I've also been told to avoid houses built just before the sales tax increase (2014) when there was a rush on new houses and many of them were very hurriedly built.
 
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Majestic

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Hello Lothor,
Just to clarify, that 90㎡ is just footprint right? How much was that actual total floor space of the house?

And, if you don't mind my asking, what was the total space of the house you ended up buying (the one that cost 3000 to build at end of bubble)?
 

Lothor

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Hello Lothor,
Just to clarify, that 90㎡ is just footprint right? How much was that actual total floor space of the house?

And, if you don't mind my asking, what was the total space of the house you ended up buying (the one that cost 3000 to build at end of bubble)?
Actual floor space and also the footprint of the place we've bought both just shy of 110m2.

The figure of 80-90m2 I gave was roughly the floor space of the new and nearly new family houses in the western suburbs of Tokyo which I assume is the type of house the previous poster is interested in. The footprint tended to be a lot lower.
 

cocoichi

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Actual floor space and also the footprint of the place we've bought both just shy of 110m2.

The figure of 80-90m2 I gave was roughly the floor space of the new and nearly new family houses in the western suburbs of Tokyo which I assume is the type of house the previous poster is interested in. The footprint tended to be a lot lower.

Indeed this type of housing. Well, since pre-owned housing in Japan is not popular and the house will most likely depreciate in value, I am looking at the cheapest possible housing options. I don't mind buying a super simple shaped home out of a brochure, with no customized walls/windows/etc.

I rather live as cheaply as possible with the option to save much of my salary in the bank instead of investing in property and trying to make a profit.
 

Lothor

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Indeed this type of housing. Well, since pre-owned housing in Japan is not popular and the house will most likely depreciate in value, I am looking at the cheapest possible housing options. I don't mind buying a super simple shaped home out of a brochure, with no customized walls/windows/etc.

I rather live as cheaply as possible with the option to save much of my salary in the bank instead of investing in property and trying to make a profit.
Indeed this type of housing. Well, since pre-owned housing in Japan is not popular and the house will most likely depreciate in value, I am looking at the cheapest possible housing options. I don't mind buying a super simple shaped home out of a brochure, with no customized walls/windows/etc.

I rather live as cheaply as possible with the option to save much of my salary in the bank instead of investing in property and trying to make a profit.

The house WILL depreciate in value, although hopefully the value of the land won't, particularly if you are planning to buy in a reasonable location. In our case, the estimated value of the house was only about 400 man, the rest of it was the value of the land, so hopefully in the long term the total value won't depreciate by much.
Anyway, how about sending me a private message if you have any more questions about the place we've bought?
 

nahadef

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This topic is very interesting. I am planning to move with my wife to Japan in 2017, and we are looking at housing options. First we will rent, but once we are in a better position, we would like to own something. Since my wife is very reluctant to buy a pre-owned house that is older than 10 years, the idea it to buy a small piece of land somewhere near a train station to commute to Osaka. On that land we want to put a prefab house, and I was wondering if anyone has any experience with this, or could point me towards a website where prices of the prefab models are shown?
I just bought a used house in the last few months. Buying a new house in Japan is, quite frankly, a stupid move. The house will depreciate to the value of the land price over 2-3 decades. Japanese housing over the last 30 years has been the best quality in the world, because the companies here keep trying to one-up each other in terms of earthquake stability. The only downside is that because the house value goes down, people tend to never upkeep their place, so you'll find 30 year-old carpets and paint jobs.

My experience was this: where I am, a new place averaged $300,000. A used place was around $150,000. We found a great place, 28-years old, close to the subway, for $145,000 (after a year of looking). We did roughly $40,000 of renovations on the place. With interest over decades, it'll be under $250,000 total. Resale in 20 years? $120,000, since land prices aren't going up, even in Tokyo. No matter what, a lot of money is going down the toilet, but buying a new house is just throwing so much cash away. If we had got a new place, it would have come out to $350,000 with interest, and still sunk down to $120,000 or so.

I really think buying a new house in Japan is one of the biggest wastes of money you could ever do. In most of the world, houses are investments. In Japan, they are siphons on your savings.

I also recommend listening to this podcast, one of the most interesting I've ever heard, since I was a house buyer in Japan:
Freakonomics » Why Are Japanese Homes Disposable? A New Freakonomics Radio Podcast
 

cocoichi

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I just bought a used house in the last few months. Buying a new house in Japan is, quite frankly, a stupid move. The house will depreciate to the value of the land price over 2-3 decades. Japanese housing over the last 30 years has been the best quality in the world, because the companies here keep trying to one-up each other in terms of earthquake stability. The only downside is that because the house value goes down, people tend to never upkeep their place, so you'll find 30 year-old carpets and paint jobs.

My experience was this: where I am, a new place averaged $300,000. A used place was around $150,000. We found a great place, 28-years old, close to the subway, for $145,000 (after a year of looking). We did roughly $40,000 of renovations on the place. With interest over decades, it'll be under $250,000 total. Resale in 20 years? $120,000, since land prices aren't going up, even in Tokyo. No matter what, a lot of money is going down the toilet, but buying a new house is just throwing so much cash away. If we had got a new place, it would have come out to $350,000 with interest, and still sunk down to $120,000 or so.

I really think buying a new house in Japan is one of the biggest wastes of money you could ever do. In most of the world, houses are investments. In Japan, they are siphons on your savings.

I also recommend listening to this podcast, one of the most interesting I've ever heard, since I was a house buyer in Japan:
Freakonomics » Why Are Japanese Homes Disposable? A New Freakonomics Radio Podcast

I tend to agree with you, but throwing away cash is always relative right? In case of rent you would have paid probably much more per month for a similar place, and you wouldn't have the possibility to make the place yours in terms of remodeling. 250.000 / 360 = about 700 per month.
 

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I just bought a used house in the last few months. Buying a new house in Japan is, quite frankly, a stupid move. The house will depreciate to the value of the land price over 2-3 decades. Japanese housing over the last 30 years has been the best quality in the world, because the companies here keep trying to one-up each other in terms of earthquake stability. The only downside is that because the house value goes down, people tend to never upkeep their place, so you'll find 30 year-old carpets and paint jobs.

I really think buying a new house in Japan is one of the biggest wastes of money you could ever do. In most of the world, houses are investments. In Japan, they are siphons on your savings.

Agree entirely with your view that buying a new house in Japan is a massive waste of money. A couple of points though.

1) First, land prices are going up in Tokyo, albeit slowly, and there are some hotspots where they are rising quite rapidly. I doubt this will continue as Tokyo's population starts falling after 2020, which may be an argument to buy as close to the centre as you can afford to.
2) Secondly, I'm a bit dubious as to your comment about the high quality of Japanese houses. If they were so good, why are so many pulled down after 30 years? I think there's a difference between earthquake-resistance and quality, to be a bit facetious, a cardboard box has excellent earthquake resistance but you wouldn't want to live in one!

A final tip for those thinking of buying, if you put the area into the Japanese Wikipedia, e.g., Aoyama 1-chome (not that I'd ever be living there!), it should tell you the official value of the land per m2. This will give you an idea of what you're paying for the land and for the house.
 
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