Has anyone built or purchased a house in Japan?
#16
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Several highly rated landlords do rent to elderly though. The contract is a fixed term lease so it is a safe bet usually. At some of the prices in Tokyo its the elderly who can afford the rent. :-)
#17
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Highly selective choice of numbers & situation is highly selective.
I agree that it can and might make sense in some very specific locations within any given area. But you mislead when you mention specific examples in specific areas and then extrapolate that to "it most certainly does make financial sense to buy here in Japan."
Contrast your numbers with building a 3Bd house in, say, Aomori just outside Hachinohe. Now, seeing as we're being selective in our choice of numbers/situations let's say the foreigner doesn't qualify for a loan from a Japanese bank and is stuck using an international bank at (que horror!) 3%, with no tax break because the lender is not Japanese domiciled.
But a 3Bd rental (less than 10 years old) can be had for under 50k a month. And investments, particularly for non-Japanese builders (which we are talking about), are global so I can happily invest in, say, NZ and get 6% return without much effort.
I'm all for apples to apples comparisons and considerations. You're not making them. All I'm saying is that the numbers require more work than you're saying before someone decides what is best for their situation.
Oh, and looking at the data, the number of areas where *residential housing* appreciates in Japan is exactly *zero*. *Land* is valued and appreciates. Improvements (ir. buildings) aren't taken into consideration in ratable value or general residential real estate - although the cost to demolish and existing building can affect the land value. Residential housing in Japan only depreciates with some very rare exceptions. That's why the government gives tax breaks - to encourage people to build new. Its why, as I said up thread, people usually don't do much in the way of maintenance or updates on their homes.
I agree that it can and might make sense in some very specific locations within any given area. But you mislead when you mention specific examples in specific areas and then extrapolate that to "it most certainly does make financial sense to buy here in Japan."
Contrast your numbers with building a 3Bd house in, say, Aomori just outside Hachinohe. Now, seeing as we're being selective in our choice of numbers/situations let's say the foreigner doesn't qualify for a loan from a Japanese bank and is stuck using an international bank at (que horror!) 3%, with no tax break because the lender is not Japanese domiciled.
But a 3Bd rental (less than 10 years old) can be had for under 50k a month. And investments, particularly for non-Japanese builders (which we are talking about), are global so I can happily invest in, say, NZ and get 6% return without much effort.
I'm all for apples to apples comparisons and considerations. You're not making them. All I'm saying is that the numbers require more work than you're saying before someone decides what is best for their situation.
Oh, and looking at the data, the number of areas where *residential housing* appreciates in Japan is exactly *zero*. *Land* is valued and appreciates. Improvements (ir. buildings) aren't taken into consideration in ratable value or general residential real estate - although the cost to demolish and existing building can affect the land value. Residential housing in Japan only depreciates with some very rare exceptions. That's why the government gives tax breaks - to encourage people to build new. Its why, as I said up thread, people usually don't do much in the way of maintenance or updates on their homes.
We could make the very rational assumption that a non-Japanese may live in a more expensive urban setting. Not always the case but a far better bet for illustrative purposes here.
We could also assume that if one were considering building a home in Japan that such a person may be well enough integrated into the economy so as to qualify for a loan from a local bank. Again I am sure exceptions exist but outliers are not the norm.
Finally, land does go up in price, this is true. But so do houses and apartments. Claiming otherwise ignores basic supply/demand as well as easily accessible public data.
Maybe we should ask someone who actually works in real estate in Japan?
#19
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It depends a lot on where and what you build.
I would not worry about earthquakes. All new buildings in Japan are now pretty much impervious to earthquakes.
As to the vendor, I've used Misawa and was very pleased with the results, but I think it mostly depends on the actual contractor and the building options you choose.
Also all the speculation in this thread about the economics of buy/build/rent is just that... speculation. It really depends on location, property and your individual circumstances.
I would not worry about earthquakes. All new buildings in Japan are now pretty much impervious to earthquakes.
As to the vendor, I've used Misawa and was very pleased with the results, but I think it mostly depends on the actual contractor and the building options you choose.
Also all the speculation in this thread about the economics of buy/build/rent is just that... speculation. It really depends on location, property and your individual circumstances.
Last edited by 5khours; Nov 14, 2017 at 1:36 am
#20
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It depends a lot on where and what you build.
I would not worry about earthquakes. All new buildings in Japan are now pretty much impervious to earthquakes.
As to the vendor, I've used Misawa and was very pleased with the results, but I think it mostly depends on the actual contractor and the building options you choose.
Also all the speculation in this thread about the economics of buy/build/rent is just that... speculation. It really depends on location, property and your individual circumstances.
I would not worry about earthquakes. All new buildings in Japan are now pretty much impervious to earthquakes.
As to the vendor, I've used Misawa and was very pleased with the results, but I think it mostly depends on the actual contractor and the building options you choose.
Also all the speculation in this thread about the economics of buy/build/rent is just that... speculation. It really depends on location, property and your individual circumstances.
As to the statement: "All new buildings in Japan are now pretty much impervious to earthquakes". No not by a very wide margin is this true. It would be great if it were but so long as people persist in the wooden frame house there will be garbage in the market., Also apartment/office buildings that do not incorporate absorptive technology are destined for bad results. The current Jutaku Kojo laws say all new buildings qualify, but from a technological standpoint they are not all equals.
Contractors and budget choices are very much the final determinant in quality although a good consultant or main contractor can make sure corners are not cut.
On speculation, there is very good and long tracked data for the three central wards of Tokyo and much for Shinjuku and Shibuya as well. Immediately peripheral ward data is pretty decent also. So there is not really speculation on rental prices, purchase prices or sales prices there. Outside of that there is but my bias is to central Tokyo.
#21
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To add to mjm's post with an example; my father in law lives in a small(ish) block of flats in Minami Azabu. The residences are split into two blocks which share the same stairs and elevators and are connected at each floor.
I don't recall the whole story, but the gist of it was that one block was built to higher specifications than the other block. Knowing this, one starts to see a few differences (certainly a few more cracks in the inferior build). But I can't imagine many people guessing the discrepancy in quality just by looking, the two blocks appear to be the same.
I don't recall the whole story, but the gist of it was that one block was built to higher specifications than the other block. Knowing this, one starts to see a few differences (certainly a few more cracks in the inferior build). But I can't imagine many people guessing the discrepancy in quality just by looking, the two blocks appear to be the same.
#22
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Also I would stick to my earlier statement that economics depend on individual circumstances and specific properties. Personally I'm long and also bullish on central Tokyo, but I think even for central Tokyo you need to take into account other factors including: can the buyer get financing or do they need to pay cash, can the buyer absorb a large short term hit if there is a cyclical downturn, with a brand new building is the buyer willing to accept the above market premium for newly built buildings, what happens if long term trends change, with a premium property can the owner wait a year or more if they need to sell, what's the real opportunity cost of capital (not limiting yourself unrealistically to yen assets.)
#23
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Also I would stick to my earlier statement that economics depend on individual circumstances and specific properties. Personally I'm long and also bullish on central Tokyo, but I think even for central Tokyo you need to take into account other factors including: can the buyer get financing or do they need to pay cash, can the buyer absorb a large short term hit if there is a cyclical downturn, with a brand new building is the buyer willing to accept the above market premium for newly built buildings, what happens if long term trends change, with a premium property can the owner wait a year or more if they need to sell, what's the real opportunity cost of capital (not limiting yourself unrealistically to yen assets.)
#24
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@mjm
Unless things have changed, the rating doesn't have any impact on life safety. Anything built today is safe. Sure with cheaper building you might get cracks and other issues, but you won't get a collapse or structural failure. If you look at Kobe where they had intensity 7 shockwaves, there was virtually no damage to any post 1971 structures. A few cracks. That was it. I've spent a ton of time with structural engineers on new buildings and reinforcement projects, and as far as I can tell the proclaimed differences in earthquake engineering/building technique is mostly sales hype and has nothing to do with earthquake life safety (tsunamis/fires are a different question).
As to the economics.
Unless things have changed, the rating doesn't have any impact on life safety. Anything built today is safe. Sure with cheaper building you might get cracks and other issues, but you won't get a collapse or structural failure. If you look at Kobe where they had intensity 7 shockwaves, there was virtually no damage to any post 1971 structures. A few cracks. That was it. I've spent a ton of time with structural engineers on new buildings and reinforcement projects, and as far as I can tell the proclaimed differences in earthquake engineering/building technique is mostly sales hype and has nothing to do with earthquake life safety (tsunamis/fires are a different question).
As to the economics.
- Self employed, retired, investor, etc. - Almost impossible to get a property loan regardless of financial condition.
- Agree rental income in central Tokyo (on non-premium residential property anyway) is rock solid even in a downturn. Residential rents in Tokyo went down maybe only 2 to 3 percent after Lehman. (Rents on premium residential properties got whacked.) Occupancy rates have been similarly solid for non-premium properties during downturns, but I was actually referring to the case, where you want to sell the property when the market is down. Even on non-premium properties, it would be very easy to lose 30% or 40% of what you paid if your timing is bad. Some people who bought high end condos in the late 1980s lost 90% of the value of their property.
- I was not referring to a premium on the loan pricing (AFAIK there's very little difference in loan terms between banks,) I was referring to the premium you pay on the purchase price if you buy a newly built condo or house.
Last edited by 5khours; Nov 15, 2017 at 6:40 pm
#25
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This is a great topic and I hope people gain greater perspective if considering buying. Lots to ponder n both sides of the equation.
It has not changed and yes it has a great deal to do with life safety.
Safe until it is not, yes. (i.e. hit with a big enough seismic jolt)
This is patently false and I would strongly recommend learning more about this. It is precisely for this reason that efforts are constantly being made to solve the Long-period wave destruction.
Again, completely untrue and it was from this earthquake that gas rather than electricity powered generators came into more widespread use in commercial projects.
Sales hype? Really? I think a bit more learning about absorptive systems, results, predictive systems, triage of problem solving, access to life supplies, etc. is in order if that is the opinion held. Suffice it to say it is not the opinion of the Earthquake Research Institute at the Univ. of Tokyo, the fire dept. and others who would know and who have no commercial horse in the race.
Self-employed as a teacher or a company president? I would not loan money to a teacher or other contract staff either to be honest. They fall into the category of bad loan prospects due to no long term tie to Japan. Retired? The timeline to pay off a loan is up to 30+ years here. How do we know they will be alive? Debts of deceased parties in Japan are forgiven not passed on. Banks dont want to take a bath. Investors buy homes all the time, and if Japanese have easy access to loans. If non-Japanese they may not have the credentials to even get a bank account, i.e. a resident alien card. I have to say, three very weak examples on which to base an argument.
I thought we were talking about buying to live in? If so why is someone selling? If purely an investment then it can be a hit but not if living there. From 2008 for some time (post-Lehman shock) there were losses on rental income of 20-30% not just 2-3%. But, the elasticity of domestic demand became very clear, and the demographic of renting parties changed and what has occurred is an organic growth of new lessees that have the characteristic of being stable for the very long term, i.e. locals. As for bubble era purchases losing money, that is more related to the thinking and the banks than to the property market per se. A lot of bad investments were made, but that does not mean the underlying asset has dramatically changed in nature.
I do not believe in EMH as a be all and end all philosophy. There is too much evidence to the contrary. Efficiency in information dissemination is a fallacy, but EMH does not hold up without it. I am more about the actual data and looking at that rather than describing predicted market behavior. I would not buy a fund based on past performance, but would and have bought Tokyo real estate on such data. Totally different animals and subject to significant different influences.
2020 is going to be an interesting time to see. I think 2025, a time at which 2020 choices will begin to have effect. I think buying if you will live there in Central Tokyo is without any doubt the right call for anybody. Especially in Central Tokyo.
Safe until it is not, yes. (i.e. hit with a big enough seismic jolt)
I've spent a ton of time with structural engineers on new buildings and reinforcement projects, and as far as I can tell the proclaimed differences in earthquake engineering/building technique is mostly sales hype and has nothing to do with earthquake life safety (tsunamis/fires are a different question).
- Agree rental income in central Tokyo (on non-premium residential property anyway) is rock solid even in a downturn. Residential rents in Tokyo went down maybe only 2 to 3 percent after Lehman. (Rents on premium residential properties got whacked.) Occupancy rates have been similarly solid for non-premium properties during downturns, but I was actually referring to the case, where you want to sell the property when the market is down. Even on non-premium properties, it would be very easy to lose 30% or 40% of what you paid if your timing is bad. Some people who bought high end condos in the late 1980s lost 90% of the value of their property.
That said, if someone needed a modest place to live in Tokyo for 15 to 20 years and has a salaried job at a reputable employer, buying might be the right option... but I'd probably wait until 2020 since IMHO the market's a little rich at the moment. Or if you want a nice place and don't mind the risk/return characteristics, buying might also be a good option. But I don't think you can generalize that buying is the right option for everybody... even in central Tokyo.
#26
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Self-employed as a teacher or a company president? I would not loan money to a teacher or other contract staff either to be honest. They fall into the category of bad loan prospects due to no long term tie to Japan. Retired? The timeline to pay off a loan is up to 30+ years here. How do we know they will be alive? Debts of deceased parties in Japan are forgiven not passed on. Banks dont want to take a bath. Investors buy homes all the time, and if Japanese have easy access to loans. If non-Japanese they may not have the credentials to even get a bank account, i.e. a resident alien card. I have to say, three very weak examples on which to base an argument.
If you are seishain banks generally love to lend you money, especially if your company is big/famous. If you're not seishain, it gets a lot trickier (this isn't just for foreigners but for Japanese as well).
#27
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Self-employed at any level makes it fairly difficult, at least for my experience. I know simultaneous interpreters, who are basically always self-employed (and get around 80k yen per day for more than 4 hours of work), who have had trouble. I knew of a Japanese teacher who started his own school and had 70+ students and had trouble. I have a friend who owns a chain of schools (with, I believe 10+ full-time teachers) who only used Citibank (not sure who he uses now) because he was tired of the nonsense from other banks.
If you are seishain banks generally love to lend you money, especially if your company is big/famous. If you're not seishain, it gets a lot trickier (this isn't just for foreigners but for Japanese as well).
If you are seishain banks generally love to lend you money, especially if your company is big/famous. If you're not seishain, it gets a lot trickier (this isn't just for foreigners but for Japanese as well).
#28
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When I went skiing in Kiroro, the new ski-in/out condominium project slated to open soon got my interest. They don't advertise the price and I could be wrong, but I seem to recall that a 2LDK is going to start at $700,000USD or so. If true, that's a stupendous price for that type of location in rural Jpn. Any possibility of a purchase or even looking into it went out the window instantly. Then again, it shouldn't surprise anyone when you look at home prices in Niseko.
Anyways, I recently googled them and there is no info at all in Japanese.
Yu Kiroro | Luxury Ski-in Ski-Out Apartments for Sale in Hokkaido Japan
Come to think, all the real estate brochures I saw in Niseko were in English only, I think.
I wonder if the upscale real estate in Hokkaido resort market strictly geared towards foreign clientele and doesn't even give Japanese a hoot? If so, that is a very interesting phenomenon, and resort areas in Hokkaido should continue to evolve uniquely.
Also, I wonder why the situation is so very different in Honshu resort markets such as Echigo Yuzawa where there's plenty of skiing and great access to Tokyo and yet you see zero new developments and a whole bunch of bubble-era 30yo mansions being offered dirt-cheap?
The dirt-cheap Echigo Yuzawa are just money pits and these new Hokkaido properties are just going to follow in the footsteps of what happened in E.Yuzawa? Or, these Hokkaido properties are rightfully priced and the currently cheap E.Yuzawa listings are golden opportunities? Would love to get opinions from someone who knows Jpn real estate situation.
Anyways, I recently googled them and there is no info at all in Japanese.
Yu Kiroro | Luxury Ski-in Ski-Out Apartments for Sale in Hokkaido Japan
Come to think, all the real estate brochures I saw in Niseko were in English only, I think.
I wonder if the upscale real estate in Hokkaido resort market strictly geared towards foreign clientele and doesn't even give Japanese a hoot? If so, that is a very interesting phenomenon, and resort areas in Hokkaido should continue to evolve uniquely.
Also, I wonder why the situation is so very different in Honshu resort markets such as Echigo Yuzawa where there's plenty of skiing and great access to Tokyo and yet you see zero new developments and a whole bunch of bubble-era 30yo mansions being offered dirt-cheap?
The dirt-cheap Echigo Yuzawa are just money pits and these new Hokkaido properties are just going to follow in the footsteps of what happened in E.Yuzawa? Or, these Hokkaido properties are rightfully priced and the currently cheap E.Yuzawa listings are golden opportunities? Would love to get opinions from someone who knows Jpn real estate situation.
#29
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Secondly, the Hokkaido resorts are just way more foreigner/English friendly. While it was still a bit of a hidden gem when I started going 15 years ago, today, the infrastructure is heavily geared to the foreigner market and it's just easier to book a hotel/villa, rent gear, get lessons, order food, etc. in English. You probably don't even need to speak Japanese at all during your stay in Hokkaido/Niseko and feeling comfortable is important when you're on holiday for a week or two.
#30
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There's no doubt that snow quality is better, runs are longer, and resort infrastructure is better up in Hokkaido. But I actually saw higher % of Westerners at NASPA (Yuzawa) than Kiroro, although Kiroro had more Asian visitors. It seemed a good half of the skiiers at NASPA were foreigners, and everything is written in Japanese and English and they offer English lessons.
If I had to choose between buying a condo in Hokkaido vs Yuzawa for the same price, of course I'd choose Hokkaido. But I'm totally priced out in Hokkaido. Even if I could afford it, it seems like a high-risk/low-reward situation. Meanwhile, I think Honshu resorts may have the potential to become year-round destinations with high-speed quads replacing slow lifts and ski-in/out Sheratons being built. And condos in Yuzawa are extremely affordable and difficult to imagine going much lower. Some 2LDK's are going for <500,000yen (all these places were built ~1990, which would not be a problem in US but I concede is problematic in Jpn). There are articles talking about condo owners in Yuzawa actually paying money to get these properties off their hand since they can't find takers and the HOA fees are expensive. But I guess I don't understand the math and/or Jpanese real estate, because I'm seeing HOA fees of 30,000-40,000yen at these places which I consider to be reasonable. That's nothing compared to US where, in pricier markets, you might see HOA fees of $600-800/month. At 500,000yen, it seems like there's not much to lose. Or is there?
If I had to choose between buying a condo in Hokkaido vs Yuzawa for the same price, of course I'd choose Hokkaido. But I'm totally priced out in Hokkaido. Even if I could afford it, it seems like a high-risk/low-reward situation. Meanwhile, I think Honshu resorts may have the potential to become year-round destinations with high-speed quads replacing slow lifts and ski-in/out Sheratons being built. And condos in Yuzawa are extremely affordable and difficult to imagine going much lower. Some 2LDK's are going for <500,000yen (all these places were built ~1990, which would not be a problem in US but I concede is problematic in Jpn). There are articles talking about condo owners in Yuzawa actually paying money to get these properties off their hand since they can't find takers and the HOA fees are expensive. But I guess I don't understand the math and/or Jpanese real estate, because I'm seeing HOA fees of 30,000-40,000yen at these places which I consider to be reasonable. That's nothing compared to US where, in pricier markets, you might see HOA fees of $600-800/month. At 500,000yen, it seems like there's not much to lose. Or is there?