Real estate in Japan: A good time to buy or not?

Christopher Dillon Principal Dillon Communications Ltd

TOKYO —

In a recession, there is usually one investment which is a safe bet—real estate. And now is a good time to consider buying property in Japan, says Christopher Dillon, a Hong Kong–based writer and principal of Dillon Communications Ltd, a boutique consultancy.

Born in Canada, Dillon lived in Tokyo from 1989 to 1992, before moving to Hong Kong. He has since worked with some of the world’s most successful companies, including Bechtel, Deloitte, the Economist Group, Manulife, Munich Re and Wal-Mart. He is also the author of “Landed: The guide to buying property in Japan,” which followed his first book, “Landed: The expatriate’s guide to buying and renovating property in Hong Kong.”

From time to time, Dillon leads small-group and one-on-one communications workshops for senior executives in China, Hong Kong, India, Japan, Korea, Singapore and Taiwan, and is also in demand as a speaker at conferences and seminars.

Japan Today hears more from Dillon about real estate investment in Japan.

How often do you visit Japan?

Three or four times a year, on average. Tokyo is one of my favorite cities.

Is now a good time for overseas investors to consider buying property in Japan, especially considering the high yen?

It’s a good time to invest in Japanese property, but you have to be selective. For example, I like Tokyo, which benefits from migration from other cities and prefectures. As an investor, I also like older apartments in working-class neighborhoods. These properties are inexpensive, yields are good and there is strong, stable demand.

I also believe the bad news about Japan has been overdone. If all you know about Japan is what you read in the papers, you’d have to conclude that the country is a smoldering ruin. Japan has problems, but it remains the world’s third-largest economy, it has advanced technology, a skilled, educated work force, and tremendous social cohesion.

The yen’s strength is not major issue. The Americans and Europeans seem intent on keeping their currencies weak – to the detriment of Japan, Canada, Australia and other countries – and I don’t see that changing any time soon. Furthermore, the Economist’s Big Mac index shows that the yen is overvalued by just 5% on a purchasing-power parity basis.

What are some peculiarities of the Japanese real estate market that you don’t see in other countries?

Japan differs from Western housing markets in many ways. One of the biggest is in the preference for new property. In Japan, used homes represent about 13% of total sales, compared to 78% in the United States and 89% in Britain. That is changing, as the Japanese government encourages the construction of long-life homes, but many people still see homes as consumable items.

Also, the idea of a “handyman’s special” — where you buy an old, decrepit home, fix it up and resell it — is uncommon in Japan. Most home are demolished after 30 years and rebuilt.

Another difference is the lack of insulation. Given that Japan imports almost all of its energy, double-glazing, thermal insulation and other environmentally friendly technologies have been slow to catch on. A fourth difference is in the accessibility of information. In the United States and Canada, the Multiple Listing Service (MLS) and zillow.com give buyers a huge amount of data. The Japanese equivalent to MLS, the Real Estate Information Network System (REINS), is only available to real estate agents.

Are you personally looking for investment property in Japan? In which countries do you invest?

In October, I bought an apartment in Tokyo and I’m always looking for interesting investments. I also own property in Hong Kong.

Are there particular areas in Tokyo where people can look for bargain properties?

Prices in grittier areas, like Adachi-ku and Itabashi-ku are surprisingly inexpensive. If you want to live in Azabu or Hiroo, on the other hand, you’re going to pay for the privilege. The irony is that working-class neighborhoods in Tokyo are not like working-class neighborhoods in other cities, which are often rundown, crime-ridden and poorly served by transportation and other infrastructure.

You can also find bargains in rural areas, but you have to consider the economic viability of the community where you’re buying. With declining populations and the hollowing-out of Japan’s manufacturers, there have been lots of cutbacks to essential services, like hospitals, schools, train services and so on. Those cutbacks don’t bode well for your quality of life or rental yields.

How well received have your two “Landed” books been? Which one sold the most copies: Hong Kong or Japan?

Reviews for both books have been positive, and the first book was on the Hong Kong bestseller list for several weeks. But what I’ve really enjoyed has been the feedback from people who used the book to buy a home. One of my neighbors, who stopped renting and bought an apartment, told me, “I think of 52,000 ways that I love you every month,” referring to the difference between her rent and mortgage payment. That was a very pleasant surprise.

The Hong Kong book has been on the market for nearly three years, so it has sold more copies. But the Japan book is catching up.

Are you thinking of writing another “Landed” book?

I’m looking at several markets that might benefit from a Landed book. Ultimately, I’d like to create a franchise similar to the Lonely Planet guides.

How is Dillon Communications doing? Has 2010 been a good year for you?

It has been a good year. Hong Kong’s economy is booming and there is a sense of optimism in the air, largely due to China’s rapid economic expansion.

Do you enjoy speaking at events and conferences? What do you learn or take away from such events?

Speaking at conferences makes up for the time you spend alone writing. While it’s great to hear that someone enjoyed the book, I also appreciate the critical remarks. There is always something that can be improved, an issue that you haven’t addressed or an idea that can be incorporated into the next edition. If you listen closely, there is always something you can learn.

How do you like to relax when you are not working? Any hobbies or sports?

I relax by spending time with my family. My kids play rugby, which is hugely popular in Hong Kong, and weekends are often spent cheering them on. I’m also active in the Society for the Promotion of Hospice Care and the local TED conferences.

Chris Dillon will be leading an online webinar in which he will share his insight and experience on the Japanese property market. If you are interested in finding out more, the webinar is open to all. Find out more info at: http://www.realestate.co.jp/2010/11/26/webinar-to-learn-about-buying-selling-and-renting-property-in-japan/

  • 0

    chuckers

    In a recession, there is usually one investment which is a safe bet—real estate.

    Ummm...isn't that how we got into the current mess in the first place?

  • 0

    ronaldk

    I have never heard a real estate agent say it is a bad time to buy property. Asking someone in Hong Kong, which is at the apex of a massive real estate bubble poised to explode is meaningless. This guy will be broke in a few years like all the other real estate "investors".

  • 1

    Foxie

    This is good for the rest of the world but I would never invest in property in Japan. The value decreases year by year.

  • 0

    kyoken

    This is good for the rest of the world but I would never invest in property in Japan. The value decreases year by year.

    Not everywhere, Tokyo does have some areas that gain in value. The problem though is that these hotspots seem to change unpredictably within a relative short period.

    Plus I would be very wary to invest in property in a country where property can be destroyed in an instance by shaking earth.

  • -1

    Richard_III

    I have never heard a real estate agent say it is a bad time to buy property.

    This is very true.

    I was thinking of buying here a couple of years ago and was hearing this all the time from the Realty chaps I was dealing with. I'm actually glad that I didn't buy in the end. There might be some savings in comparison to rent but depreciation is a big worry.

    Aside from design issues with newly built houses (I'm not that keen on a lot of the designs on pre-fab housing here) there is the issue of quality. As is noted by Mr Dillon, the absense of any insulation or central heating in newly built homes means basically that you have to source your building contractors etc. and design the building yourself. I can imagine that this would be very difficult trying to introduce new ideas (insulation is only really a new idea to Japan nowadays) with contractors, and you probably have to get your materials from overseas.

    These factors, plus the depreciation, detered me from making the purchase. I also have some long term worries about the future of Japan which has added to the uncertainty.

  • 1

    goddog

    I foolishly bought a Mansion here 15 years ago for 43 million yen. It is worth about 15 million now. I owe the bank a ton of money, and the mortgage goes until I am 76. Sucks. Do not buy here.

  • 1

    BoratLikeBarry

    Get a car park instead, real estate is a joke industry now.

  • 1

    fishy

    I foolishly bought a Mansion here 15 years ago for 43 million yen. It is worth about 15 million now. I owe the bank a ton of money, and the mortgage goes until I am 76. Sucks. Do not buy here.

    I wouldn't recommend anyone to buy a mansion in japan but a house with land would be good if you carefully choose a location because the value of the land can remain or increase (again, carefully choose a location). so after the value of the house decreases, you can still keep the land and/or sell it.

  • 0

    my2sense

    I knew goddog would post...- my apologies bro. Good one ronaldk.

  • 0

    commanteer

    Agreed. Choose a house on a nice piece of land in an urban area that is growing. Many older houses sit on enough land to build two houses - nice if you want to sell to developers later on. Though the population is declining, urban areas are catching many of those fleeing the dying smaller cities. Prices have depreciated...well, yes. That generally indicates a good time to buy. You don't want to jump in when everyone is talking about how great it all is - that's called a bubble.

    And despite all the concern over deflation, Japan will be dealing with severe - maybe hyper - inflation within 5 years. There's no other way to pay off the national debt. That is a nice time to be holding onto something solid like property.

  • 1

    Foxie

    Yes, fishy, choose the location really carefully. That's what I did 15 years ago. The area was really promising at the time but guess what, very little happened afterwards and the plan with a huge industrial area with tons of jobs went up in smoke. Well, at least I am living in a very quiet area now with a big forest behind my house and I have a huge garden, big enough to practice golf and I am planning on building an archery area next spring. I sympathize with goddog.

  • 0

    nandakandamanda

    Bought an apartment 'mansion' for 22 mill seven or eight years ago. Really good location. Rented it out to non-smokers only. Quite a turnover in lodgers and each new one wanted to negotiate a discount. Became harder and harder to rent so eventually sold it for 17 mill last year. The people paid cash and moved in the day they signed. When all the rent is considered, I just about broke even. Bit of a relief now after hearing goddog's story.

  • 1

    Aisan

    It is idiotic to listen to an agent.

    He will say any time is good time to buy.

    The other day I met an agent from Ireland, he kept telling me that the properties are dirt cheap now and said that I must buy now and the property will appreciate.

    When I asked him how many properties he has in Ireland, he said none. So it would be foolish to listen to an agent.

  • 1

    GJDailleult

    Another difference is the lack of insulation

    I know an old guy in Tokyo who knocked down his old house and rebuilt using some company using Swedish design. Claims a 60% reduction in his heating and air conditioning costs. Multiply that over the country and that is a hell of a lot of wasted energy in Japan. Myself, I hate it on those winter mornings when I open the sliding doors and the outside is warmer than it is in my house. Opposite happens in summer. Crazy!

    As for buying real estate, the house is a depreciating asset. The value is in the land. There might be some reasons you want to buy - you like fixing things up or just doing what you want with the place, or as a form of forced savings (but there are other ways you can do that). But the Greenspan idea that rising real estate prices are a kind of wealth creation is nonsense. They are wealth transfers. You are basically betting on whether there is going to be asset price inflation or deflation in the future. And, as said earlier, of course it was asset price inflation that in large part caused Japan's and the world's present mess in the first place.

    But if people want to think now is a good time and want to try to catch a falling knife, they will.

  • 0

    noborito

    Foreigners are fleeing Japan in the thousands. Companies are cutting salaries. Expat jobs are all but gone. Why any foreigner would buy in Japan for other than a weekend pleasure house is beyond me. Japanese hate having foreign neighbors and often call the local authorities about any problems that they feel are happening. (all because of foreigners) and feel property values go down once someone moves in. In addition, the endless, wow an English teacher can buy a house, comment is insulting time after time after time. Japan.. buying a place... why?

  • 0

    DentShop

    I foolishly bought a Mansion here 15 years ago for 43 million yen.

    Yes - you may have mentioned this on JT about 15-20 times at least.

  • 0

    Klein2

    "Yes - you may have mentioned this on JT about 15-20 times at least."

    I would love to read a point/counterpoint discussion between Goddog and this Christopher Dillon. No puff pieces, just the fire and ice. Goddog would steal the show, I bet. CDillon would politely make Goddog look stupid until Goddog brings out the numbers showing that the real estate slide has not truly relented for about 20 years now. Goddog bought his property as an optimist, from an optimist. Probably from some guy just like CDillon.

    My experience in life is that the smiley guys in suits will separate you from huge piles of money. I dodged a real-estatey time-sharey scam a couple of years ago that is just coming to light now. Seems that about 200 investors were taken for about 3 oku. Not a huge amount per person, but anyway, I heard the spiel from Mr. Crook himself, and he was well dressed, with a nice car, and bragging about his family's education 10 minutes after I met him. Name-dropping. Mutual friends. Etc. At that first meeting, he made his pitch and asked for money. I asked if he could show me a contract. He said no. I asked him what it looks like, and he would not show me until I was ready to do business... or something. So the rest was "pleasantries." That was a Monday morning, and he called on Tuesday breathlessly telling me that I was running out of time and that others were going to take my spot on the list. Turns out he was just taking investors' money and spending it on stupid knickknacks. I kind of figured that. How he kept it up so long is kind of a mystery to me, in retrospect, but 3 oku can be stretched out, I guess.

    Point being that in these hard times, some creative person will always show up to tell you that if you borrow this way or diversify or take a big risk or invest in their scheme, you will come out ok even now. Just do the numbers people and read the fine print, and don't bet on the clowns in Nagata-cho saving you.

    My number one piece of advice is to WRITE the numbers on a piece of paper and look at them. People never do this. They do the math in their head and blow it, or they listen to the wrong numbers. Or they remember the "ideal" number (projected profit) and forget the "real" numbers (price and obligations).

  • 0

    Nessie

    I would love to read a point/counterpoint discussion between Goddog and this Christopher Dillon. No puff pieces, just the fire and ice. Goddog would steal the show, I bet. CDillon would politely make Goddog look stupid until Goddog brings out the numbers showing that the real estate slide has not truly relented for about 20 years now. Goddog bought his property as an optimist, from an optimist. Probably from some guy just like CDillon.

    Anecdotal evidence is anecdotal.

  • 0

    bdiego

    While it might be a decent time to buy today, it's certainly not true that a recession is automatically a good time to buy. Japan had a two decade recession, the entire time of which was an incredibly terrible time to buy with house values declining the whole time.

    The key is to buy just before the recession ends. That's why people confuse it with "buying in a recession". No, don't do that unless you want to screw yourself over.

  • 1

    TheRat

    I foolishly bought a Mansion here 15 years ago for 43 million yen. It is worth about 15 million now. I owe the bank a ton of money, and the mortgage goes until I am 76. Sucks. Do not buy here.

    Basically, you will never be able to re-sell your mansion as new ones pop up every month, and all Japanese want new--unless you sell at very low, low price. Plus, the fact that most mansions are shabbily built, makes one think again. I bought a used house (a little cleaning and repair and paint needed) but it cost only 7.5 million. GREAT view of the city, and nice neighborhood. My wife's friend bought a relatively new house from a couple that divorced in Kokura, and it cost only 5 million! The thing is: you have to jump quickly on these deals. If you have a Japanese wife (my wife's friend is Filipino) you get the same ole same ole: I WANT NEW. Or I have to THINK about it. If you shop around and you know what you want, you get can some sweet deals but NOT in big cities like Osaka or Tokyo. Those places will always be a rip-off.

  • 0

    Bogi

    Buy an apartment in Japan only if you are prepared to live in it yourself for the next 30 years. Otherwise you will lose a lot of money or make close to nothing from your "investment."

    Property with land is another story. It can be profitable, but you need a lot of local knowledge and some luck. Always remember, if there is an obvious profit to be made on a property in the short/mid-term, it won't be for sale to YOU in the first place.

  • 0

    fishy

    american bengoshi- ya, musashi kosugi is an excellent location!!!

  • 1

    GW

    Lots of useful info in this thread, myself I didnt want to live in the city period & buying in the city there are just too many variables like when a mansion will have to be renovated & how much it will cost, I know a few people that that is & has caused major grief because tenants tend to disagree.

    I live semi-rural where land is cheap so even selling at some point wud be hard or return little, knew that, accpeted it. But there was no way I was going have a prefab toxic gas producing, massively overvalued piece of junk built. Instead since I like cottages thats what I had built a nice log house, decent size but in hind sight cud have been a bit bigger. Logs insulate great, windows all double panes so easy to heat & cool.

    My plan is hopefully I come out at the end with maybe 50-65% of the original value, I am paying essentially what I was paying as a renter but in a much better place so I figure at the end getting anything back is a bonus of sorts, thats how I look at it & decided on things.

    Will it work out, jury is out but I have less than half invested compared to friends in Tokyo & enjoy my surroundings.

    My main concern now is as richard III pointed out & thats the future direction Jpn is headed, if I was looking at doing what I did a number of years ago now I probably wudnt have built this place & maybe wud have bought a cheap older house that some have pointed out can be had for Y5-7million but you need the $$$ for those as banks will NEVER give a loan for those.

    Good luck to all who are into real estate here, think for yrselves & be VERY leary of ANY real estate agents, but that goes for anywhere anytime on htis planet.

  • 0

    fishy

    Buy an apartment in Japan only if you are prepared to live in it yourself for the next 30 years. Otherwise you will lose a lot of money or make close to nothing from your "investment."

    i agree. well, there's a different between the way most japanese people think and westerners think when buying a house/property.. for most japanese, buying a house and property means they are to stay there for the rest of their lives, not many japanese buy a house/property thinking about profit.

    i have a house right outside of tokyo and we're making monthly payment.. i wanted a house not for me to make profit but when my husband and i are gone, there's still the land so if our kids want to knock down the house and sell the land, whether the price of the land is more than what we paid or not, the children did not spend money to get the land in the first place, so it's a gift for the children when they are adults :)

  • 0

    Scrote

    Maybe it was a dream, but I thought that a year or two ago the government introduced a bigger tax deduction for those buying a house built to last 50 years, or more? I haven't seen any new housing advertised as such, which I suppose means the same, shoddy, sub-standard buildings as ever are being erected.

  • 0

    fishy

    A gift that will be subject to a stiff inheritance tax (a socialist wealth transfer tax).

    there will be still lots of left over money when/if they inherit... for the kids to get some portion of the money we spent is our profit.

    but we are actually thinking that we will sell the land and then leave the money to the children. tax, yes, but still they'll get a good amount of money.

  • 0

    fishy

    There are better ways to structure inheritance for your kids

    and ... if you know better ways, i would like your advice ;)

  • 1

    cleo

    The inheritance tax is currently 50%

    That's on an estate of over 300 million yen, after the deduction of the basic allowance. There is also an incremental allowance to a maximum of 47 million. The basic allowance is 50 million plus 10 million for each person sharing the inheritance, so assuming fishy has two children and she and Mr fishy go at the same time, the kids pay NO inheritance tax at all on the first 70 million yen's worth.

    If what's left after that is less than 10 million, the rate of taxation is 10%, and goes up in increments to 50% for the lucky people whose parents are able to leave them land worth hundreds of millions of yen. That's a pretty big plot of land.

    If you read Japanese -

    h t t p:slashslashdubyadubyadubyadota-souzoku.netslash2007slash06slashpost_46.h t m l (take out the spaces and replace the slashes and dots as necessary)

  • 1

    cleo

    fishy, if you can afford monthly mortgage payments on enough land to make you liable for inheritance tax, you can afford to engage the services of a proper accountant....

    :-)

  • 0

    fishy

    Tax rate is 50% if the tax base is over 300,000,000yen. Up to 10,000,000yen tax base, the tax rate is 10%. Up to 30,000,000yen tax base, the tax rate is 15%.. etc etc.. It scared me when you said 50%, but my land isn't worth 300,000,000yen or even closer, so.. whew.. I'd still look for better ways, though.. The good thing is that there are still well over a decade before my kids are adults :)

  • 0

    fishy

    thank you cleo :)

  • 0

    Kronos

    Japan is not a good place to but a house/mansion to flip it as an investment. Buy real estate if you are prepared to live in it. The way Westerners and Japanese approach real estate is different. People think for much longer terms here. To me that makes much more sense but your mileage may vary.

    Actually it is really difficult to profit from real estate if you are talking about big cities. Most people think of the price they paid when they bought the place and the price they got when they sold it and look at the difference. Few people consider the renovation costs, maintenance costs, taxes, interest, etc... the costs that one would NOT have paid if they had not bougt the real estate. If you consider all in, you will be needing quite an increase in market price to make a profit when you sell your real estate. Many places in big cities - land or building - do not appreciate that quickly. Maybe places around Roppongi or Otemachi will but then those are out-of-reach for many people in Japan anyway.

    Regarding the market, you have to look around really. I can speak for Tokyo only but old mansions do sell as well. It completely depends on the location and usability. I have seen 35 year old mansions bought for JPY 70 million Azabu-jyuban and other central places (not mine :-) ). Of course such places will be out of reach for many people including Japanese. As you move outside the center towards outskirts of Tokyo, it will make more sense to own a house rather than a mansion. If you have lots of money, yeah, then you can play around with real estate as investment, but I guess that goes on without saying.

    Me and my wife just bought a used mansion and hopefully will be using it for a long time. Neither of us was much interested in a house and my wife was not crazy about land or anything new. Actually she suggested that we look at used places since new ones have "newness premium" charges on top of them. I do have lots of friends who are not interested in buying a land but see pressure from their J-spouses who believe that land is the only way to go. Real Estate agents know this very well and use it.

  • 0

    GW

    One very real problem in Jpn & this jt blurb touches on it & thats how real estate developers, agents etc ALL try & very successfully conceal market info from the buying public, effectively leaving many blind & with many here not having an eye for common sense easily get rooked!

  • 0

    realist

    I personally would never dream of buying property in Japan. Too many natural disasters, and exorbitant pricing of shoebox wooden houses, on postage-stamp size land, which starts to devalue the minute you walk through the door, and has to be rebuilt a few years down the line? Thanks, but no thanks.

  • 0

    cracaphat

    Paying off a loan for 20+ years is an enforced savings plan and not a true homeowner until paid in full.

  • 0

    DC2020

    Have been looking for land in Yamanashi or Shizuoka for some time.... amazing how many people say how cheap it is in the countryside, but they all seem to be gone everytime I go to find em.

  • 0

    GW

    realist,

    Sure value for what most buy in Jpn is very low agreed, but value can be had, i have had many people at my place & when I give them an idea of the costs they flipped out at how cheap it was, & that includes a few Americans & my bro from Cda who flew over finally for a visit. He was envious because he just spent around $700,000 for a nice house on a lake & while both the house is bigger & his lot nicer & larger and a lake he was very surprised at how cheap my place was.

  • 0

    GW

    maybe but what about everyone else LOL.

  • 0

    ronaldk

    Also, our super real estate investor should mention to us sheep that real estate in Japan is recourse. So if you take a 40 million JPY loan and your apartment is destroyed in an earthquake, you are on the hook for that money. In the US, you send in the keys, get your credit ruined for 7 years, and that's it.

  • 0

    Junnama

    Bank usually require earthquake insurance before they lend for that reason :|

  • 0

    Judderman

    if land prices in japan have been declining for the past 15 years or so,what is to say they wont fall further?when can one say they have bottomed out(real estate agents not included!)

  • 0

    koiwaicoffee

    So, which are the real traps when buying a house in Japan? On the paper it seems to be more affordable than paying every month for rent. Not sure how the banks work, and really not expecting anything good from them, but isn't interest rate really low?

  • 0

    illsayit

    I dunno about this guy-sounds good. Realestate in Japan needs to focused within and for J. customers. As suggested, working class areas have reasonable community service. Japanese buildings are and will always have a certain re-cycle value to them. Usable, and maintenance. I think better results would be found trying through local builders of the area you are interested in-for land. Real-estates would be the go-between. Handy-man work is definitely where there can be movement. Not sure, but western ideologies regarding real-estate often separate builders and real-estate, whereas it isnt as clear-cut as that.

  • 0

    EbiChiri

    I bought a house in Tokyo for 41 mill 8 years back. Price now ? About 35 mill. I sold my house in Canada 8 years ago for $250,000. Price now ? $750,000 ! Nuff said.

  • 0

    KaptainKichigai

    perhaps buying a house as a financial investment is not a good choice but if you want to stay in japan and raise a family and actually LIVE in a house, it is cheaper than renting. If you buy an older house, it can be more than 50 percent cheaper and the interest rates are below 2 percent. There are tons of houses built in the 70s 80s and 90s that can be bought for a few thousand dollars down and monthly payments under 500 bucks/ 5 man a month with a mortgage 20 years and under. Just get out of Tokyo and look. There are so many places to live in Japan. pick a spot you like, talk to a realtor and start looking. If you want to live here that is, not just invest.

  • 0

    sfjp330

    Besides the tax credit on interest that you pay, how does capital gain tax apply in Japan? For instance in the U.S., if you purchased a residential home, lets say 10 years ago for $250,000 and sell the home for $500,000, and if you have been a principal owner living there for the last two years, the capital gain would be tax free up to $250,000 for individual and for married couple, $500,000. You can repeat this step as much as you like as long as you reside in the home you purchased for two years before sale. I would stay away from real estate investment in Japan. By far, U.S. has better tax advantage. The better long term investment in California will be located in San Diego, Los Angeles or San Francisco Bay Area. Compare to Japan's decreasing population, there will be significant population growth in California within 10 to 20 years creating demands.

  • 0

    porter

    I bought a house in a swank zone in Tokyo and am lovin it. Its my principle residence and we are not counting on appreciation. Got a loan at an extremely low rate.

    Buying or renting in Japan or any other country for that matter, depends on the person and his/her life choices and goals. One is not better than the other. Either way, there are pitfalls in both so caution is needed.

  • 0

    GW

    kaptainkichigai

    I think people wud have trouble getting bank loans for old houses, that was my experience a number of years ago when I took the plunge. I wud guess those older places wud have to be in large cities as banks were clear with me that they wudnt loan for places outside where I wanted to live.

    And last which bank these days is giving loans at around 2% to customers? If they are that low I imagine they arent fixed rates & cud go up if interest rates rise

  • 0

    IAMTHE1

    I do not see how a stronger yen is beneficial for a foreigner who is planing to buy real estate in Japan. The stronger yen makes the purchase more expensive, in addition with the current weakened economy in Japan, if you were to buy and apartment and rent it out, how many offers would you get to rent your apartment? I think mopre people are opting to remain at home, especially "herbivore" Japanese men than moving out and looking to rent a place. So if it going to remain unoccupied and you cannot get any income from the apartment, what is the point of investing in it now? Chances are that you might get an opportunity to buy it even cheaper further down the line.

  • 0

    RoninGaijin

    IAMTHE1 you are wrong on every count..."herbivore males" do not constitue 100% of the population and practically every place that is livable is easily rented. huge population density insures you will find some renter unless you bought a prime piece of property on battleship island (Hashima)

  • 1

    ultradodgy

    Ronaldk - All residential properties owned by individuals are fully insured by the government for earthquake damage.

  • 0

    ronaldk

    Well, I heard from an acquaintance in Kobe that many individuals who lost homes in the Hanshin Earthquake were not made whole financially. I guess one can have faith in earthquake insurance but will it really pay out?

  • 0

    KaptainKichigai

    GW That wasnt my experience at all. I went into Century 21, looked at alot of houses in my price range and had to get my National health insurance updated for the banks to consider me, but I had three banks offer loans with fixed rates. I took a 1.9 percent and a 17 year mortgage. My home was built in 1975 and was approved by 3 banks. I live in a suburb between 2 major cities and in walking distance of a major shopping district and trainline. My experience was easy and i am 100 percent happy to be a home owner.

  • 0

    Zenny11

    When I was looking to buy. We had no problems getting a loan for the purchase but everybody warned us that a 2nd loan for reform would be troublesome. At that time we were still looking at houses.

    Decided on an apartment in a yet to be build building. All the loan stuff was done by the agent we bought from, all we had to do is show up to fill in and sign the actual papers for loan, insurance, etc.

    As I said prices of the place went up to 1.5 times within 4 yrs, was a fool not to sell.

    Still areas where property prices are currently going up.

  • 0

    Torontoman2008

    IAMTHE1 is correct. A strong yen will not help foreigners buy. That's a negative aspect.

  • 0

    nigelboy

    Besides the tax credit on interest that you pay, how does capital gain tax apply in Japan?

    You don't know yet you conclude in the same paragraph "By far, U.S. has better tax advantage"???

  • 0

    sfjp330

    nigelboy at 04:48 AM JST - 3rd December. You don't know yet you conclude in the same paragraph "By far, U.S. has better tax advantage"???

    Reason why I said this was that I know there is some capital gain tax in Japan in real estate, but didn't know the percentage. In the U.S., for most people, there is no tax on gain if it applies to the followings: capital gain max of $250,000 for single or $500,000 for married couple is tax free in the U.S. if you have been a principal owner for at least two years.

  • 0

    nigelboy

    Reason why I said this was that I know there is some capital gain tax in Japan in real estate, but didn't know the percentage.

    You're not answering the question. If you didn't know the %, how on earth do you conclude that "By far, U.S. has better tax advantage"??

  • 0

    sfjp330

    nigelboy at 05:19 AM JST - 3rd Decemberou're not answering the question. If you didn't know the %, how on earth do you conclude that "By far, U.S. has better tax advantage"??

    We are talking about capital gains. Well in the U.S., there is ZERO TAX and there is SOME TAX Japan. Is this clear enough for you? In Japan, the capital gains tax is 39% if the property is held for 5 years or less, 20% if held for more than 5 years. There are also many kinds of special deductions, for example a JPY 30 million deduction (maximum) from the sale of an individual's main residence. Further, if an individual disposes of land acquired in 2009 or 2010 which it has held for at least five years as of 1 January of the year of disposal, it can take a deduction from the gain equal to the lower of either the gain itself or JPY 10 million.

  • 0

    nigelboy

    sfjp330

    You're copying american bengoshi's post.

    U.S. has capital gains tax. However, there are "EXEMPTIONS" on primary residences as you alluded to your previous post. In Japan, there are "EXEMPTIONS" on primary residences, as well, which is 30 million yen per individual. If the primary residence is owned jointly, the said "EXEMPTION" could max for 60 million yen.

  • 0

    sfjp330

    nigelboy at 05:40 AM JST - 3rd December. U.S. has capital gains tax

    We all know this. We all know there are exemptions. What else is repeated by you?

  • 0

    nigelboy

    We all know this

    Except you.

    You stated "We are talking about capital gains. Well in the U.S., there is ZERO TAX.."

  • 0

    porter

    You don't have to worry about capital gains in Japan or the US because prices won't be going up.

    I bought a house in Tokyo to live in and feel good. Previously, I experienced losing on an investment property in the US. My only suggestion regarding RE purchasing regardless of country is don't load yourself up with debt. Keep the LTV ratio low. If you don't have the cash for a big down-payment then don't buy. Leverage is seriously dangerous.

  • 0

    Klein2

    "Anecdotal evidence is anecdotal."

    Well of course it is Nessie. My point is that all of the advocates talking about "easy money" and "opportunity" are spouting opinions. Goddog is living through his mistakes and has opinions that are at least as valid. Given a week to prepare, Goddog could present as good a case against buying as CDillon could make FOR buying.

    Using a lot more than anecdotes.

  • 0

    Klein2

    Kaptain:

    I think your timing was pretty good. Congratulations. And it actually supports what CDillon seems to be writing, which is that, MAYBE, in the long run, this will look like a great time to buy.

    You have waited around what... 35 years... and it has worked out well for you.

  • 0

    Klein2

    Almost every post here is by people who are interested in speculating in real estate for what seems like a pretty short time horizon.

    I self-censored the rest of my comments because someone at JT says it is "potentially offensive." I spent 20 minutes trying to figure it out and gave up.

    I like GW and TheRat comments. Congrats to Kaptain.

    The gist is this: pay attention to what you need and what you use and you will probably always have enough.

  • 0

    Richard_III

    When I bought my place, I visited more than 50 buildings over a period of 11 months. The amount of information that real estate developers try to conceal, or in some cases flat out lie about, is absolutely staggering.

    We had the same experience. The chaps that were showing us around had very little information on what they were trying to sell us. Information on housing was also very poor. It was a purely cosmetic exercise based solely on the appearance of the property; and the immediate vicinity.

    The only thing the realty guys were certain of was that "everyone is buying now, and you should make your decision quickly". It was not a situation suited for the rational purchase of a house. We got out.

  • 0

    MeLikeJapan

    I don't necessarilly agree with all of of your analysis about buying real estate in Japan but it it contains a lot of good info about about buying real estate as an asset.

  • 1

    Mittsu

    Stupid to buy in Japan unless you are going to live or vacation in the property

  • 0

    realist

    I repeat, I would never ever dream of buying property in this country. Its just not a good investment - you would never see your money again, and who wants a tiny house made of matchwood that wouldnt last more than 25 years, and built on a piece of land too close to the neighbours where you can hear every movement in their houses and they can hear you?

  • 0

    mushroomcloud

    It seems to be a good time to buy. Foreigners are buying up Japanese real estate like crazy.

    Soon, much of Japan will be owned by outsiders. Not a bad thing, all areas considered.

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