Buying a house in Tokyo - how much can you borrow?

[Maxblack]

There often be two agents; buyer and seller. You pay your own agent though; very unlikely the buyer has to pay the SELLER's agent fees, for example. Often it's the same agent if for example you happen to go directly to the same real estate company representing the buyer; always a good idea, if possible, to reduce total people involved, but then you have to wonder about the agent's loyalties; most likely wants to help SELLER more than he wants to help BUYER, but since agent doesn't get paid if there is no sale, not exactly working against you. Just more likely to push you on properties they broker. An independent agent will simply find properties from other agents. A good agent can save you significant pain and suffering.
There will as noted above be a scrivener (lawyer, etc.) for recording the official land-transfer deed, etc. There will also likely be various others involved; management company representative if you are buying into a shared building (mansion), various bankers, possibly an accountant or two, maybe a tax agent...it is, as with all things in Japan, an overly complex and administrative process.
Also, yeah sales tax. 8% to uncle Abe.

 

[e-smile]

There often be two agents; buyer and seller. You pay your own agent though; very unlikely the buyer has to pay the SELLER's agent fees, for example. Often it's the same agent if for example you happen to go directly to the same real estate company representing the buyer; always a good idea, if possible, to reduce total people involved, but then you have to wonder about the agent's loyalties; most likely wants to help SELLER more than he wants to help BUYER, but since agent doesn't get paid if there is no sale, not exactly working against you. Just more likely to push you on properties they broker. An independent agent will simply find properties from other agents. A good agent can save you significant pain and suffering.
There will as noted above be a scrivener (lawyer, etc.) for recording the official land-transfer deed, etc. There will also likely be various others involved; management company representative if you are buying into a shared building (mansion), various bankers, possibly an accountant or two, maybe a tax agent...it is, as with all things in Japan, an overly complex and administrative process.
Also, yeah sales tax. 8% to uncle Abe.

the agent, if he's the same, takes from both the buyer and the seller.
in my case the agency took 5% here and 5% there

 

[Maxblack]

the agent, if he's the same, takes from both the buyer and the seller.
in my case the agency took 5% here and 5% there

great job if you can get it!

 

[Ken1988]

Also, yeah sales tax. 8% to uncle Abe.

The sales/purchase of land is not a taxable transaction. You don't have to pay 8% on that part. Afterwards, however, you have to pay the property tax to your municipality, mostly 1.4%, annually on their official valuation estimate of your property.

 

[MossBoss]

The standard down payment seems to be about 15 to 20 percent of the purchase price. So no subprime loans these days.....

 

[roots reggae]

When purchasing land/building separately, did you need to pay 5% agent fee for both land and builder transactions?
Are there two agents per transaction - one representing the buyer and one representing the seller?
Is there a separate/neutral party that verifies the title/ownership of the property being the seller, or is that public information?

It's hard to accurately remember everything from eleven years ago. I believe my situation is not normal, but still not sure. Since the property we bought was formerly tennis courts that were split into eight parcels, there was no house. So we had to buy the land and contract a builder. The agent who handled the land also cooperated with the builder. So, I only remember paying the agent fee for the land, but not the house.

I imagine that if a residence is already existing, there is only one agent and the purchase price and one agent fee is for both.

 

[warubuta]

1% to 2% on the outstanding loan. 20% down. 35 years. Do the math and you see that you paid a huge amount of interest (vs. JGB 10 year or whatever the benchmark is) to own an asset that will decline by at least 50% in value over that time. The house becomes worthless. The land might hold it value to some degree. A big risk. The only comparitor that makes buying look even sane is buying vs. renting. People buy in JApan only because they dont like the idea of paying rent in retirement.

IMO, the smart play for residential real estate as a foreigner in Japan who earns and spends yen and manages a global portfolio is:

1. Pay cash. Having an asset (that you also live in) helps you to have yen that performs better than a bank deposit when you consider the rent you dont have to pay. As someone mentioned, japanese stocks, bonds and deposits are all problematic. If you have yen cash, you should pay cash for your house rather than delude yourself into thinking you can mortgage the house and get leverage by investing that money in other better performing assets. Good fucking luck with that. If you dont have the cash, borrow, but pay it off as quickly as you can.
2. Spend more on the land and less on the house because the land at least has a chance of holding some of its value. The house depreciates rapidly.
3. Buy a place that can be easily sold or rented out: As with any investment, having future options and flexibility is important. The option to be able to get a cashflow from rent might make good sense in the future, but many people buy houses that are hard to rent for a few specific reasons. Being far from the station is a classic fail.
4. Buy a place that you like and works for your lifestyle. In Japan, a house is not a good investment like it is in some countries. Don't fool yourself. It's a cost that is, in most cases, slightly less costly than paying rent. That is the only reason people do it.

 

[roots reggae]

1% to 2% on the outstanding loan. 20% down. 35 years. Do the math and you see that you paid a huge amount of interest (vs. JGB 10 year or whatever the benchmark is) to own an asset that will decline by at least 50% in value over that time. The house becomes worthless. The land might hold it value to some degree. A big risk. The only comparitor that makes buying look even sane is buying vs. renting. People buy in JApan only because they dont like the idea of paying rent in retirement.

IMO, the smart play for residential real estate as a foreigner in Japan who earns and spends yen and manages a global portfolio is:

1. Pay cash. Having an asset (that you also live in) helps you to have yen that performs better than a bank deposit when you consider the rent you dont have to pay. As someone mentioned, japanese stocks, bonds and deposits are all problematic. If you have yen cash, you should pay cash for your house rather than delude yourself into thinking you can mortgage the house and get leverage by investing that money in other better performing assets. Good fucking luck with that. If you dont have the cash, borrow, but pay it off as quickly as you can.
2. Spend more on the land and less on the house because the land at least has a chance of holding some of its value. The house depreciates rapidly.
3. Buy a place that can be easily sold or rented out: As with any investment, having future options and flexibility is important. The option to be able to get a cashflow from rent might make good sense in the future, but many people buy houses that are hard to rent for a few specific reasons. Being far from the station is a classic fail.
4. Buy a place that you like and works for your lifestyle. In Japan, a house is not a good investment like it is in some countries. Don't fool yourself. It's a cost that is, in most cases, slightly less costly than paying rent. That is the only reason people do it.

Mostly all true.

However, in my case, we chose a builder that uses non-toxic materials and the design was for a "100 year house." It cost a lot more than normal for its size. It's very well insulated. Heating and air conditioning bills are low. That's why the bank would only loan us ¥13.5 million on a new house that cost ¥23 million to build. I believe the explanation was that the bank used a formula based on size. And we did not know the amount the bank would loan us until it was almost built. I had to scrape up another ¥3.5 million for that portion of the down payment that I did not count on.

https://www.theguardian.com/cities/2017/nov/16/japan-reusable-housing-revolution

The residential real estate market in Japan is not an investment in the Western sense. A profit would be extremely rare. I bought mine because my company gave me a generous housing allowance which paid for a majority of the mortgage. Also, since my wife is 25 years younger than me, I wanted to make sure she always had a house.

Still, for a shrewd person who does a lot of research, I believe there's money to be made. With Japan's shrinking population, more and more houses are being left vacant.

Here's a New York Times article on the situation:

https://www.nytimes.com/2015/08/24/world/a-sprawl-of-abandoned-homes-in-tokyo-suburbs.html

and a collection of Japan Times articles:

https://www.japantimes.co.jp/tag/vacant-houses/

 

[warubuta]

Mostly all true.

However, in my case, we chose a builder that uses non-toxic materials and the design was for a "100 year house." It cost a lot more than normal for its size. That's why the bank would only loan us ¥13.5 million on a new house that cost ¥23 million to build. I believe the explanation was that the bank used a formula based on size. And we did not know the amount the bank would loan us until it was almost built. I had to scrape up another ¥3.5 million for that portion of the down payment that I did not count on.

https://www.theguardian.com/cities/2017/nov/16/japan-reusable-housing-revolution

The residential real estate market in Japan is not an investment in the Western sense. A profit would be extremely rare. I bought mine because my company gave me a generous housing allowance which paid for a majority of the mortgage. Also, since my wife is 25 years younger than me, I wanted to make sure she always had a house.

Still, for a shrewd person who does a lot of research, I believe there's money to be made. With Japan's shrinking population, more and more houses are being left vacant.

Here's a New York Times article on the situation:

https://www.nytimes.com/2015/08/24/world/a-sprawl-of-abandoned-homes-in-tokyo-suburbs.html

and a collection of Japan Times articles:

https://www.japantimes.co.jp/tag/vacant-houses/

The hundred year house is a big game changer IMO, and a smart move to buy one. A guy near me just built a Hebel House 5 unit 2 storey rental complex. It filled up right away and it is going to last for at least 100 years. Amazing technology. A very different kind of investment. Low maintenance. Positive cash flow forever.

 

[MikeH]

People buy in JApan only because they dont like the idea of paying rent in retirement.

Also because it gets increasingly difficult to rent when you are retired and old. Especially if you live alone, owners really don't like the idea of someone kicking the bucket in their house as a haunted place is impossible to rent again.

 

[roots reggae]

The hundred year house is a big game changer IMO, and a smart move to buy one. A guy near me just built a Hebel House 5 unit 2 storey rental complex. It filled up right away and it is going to last for at least 100 years. Amazing technology. A very different kind of investment. Low maintenance. Positive cash flow forever.

Yeah, but I have to give my wife credit for the choice.

Our walls are not normal walls. They are made of a kind of agar-laced material and designed to "breathe." The exterior is also made of a different material that resists mold. Our neighbors' houses built at the same time as ours, are not holding up as well. Our next door neighbor's house white house is plagued by green mold. My old rental house had tile ofuro, black mold that was impossible to remove. The new house-no sign of mold. In the rental, mold on the walls behind the sofa, refrigerator, and cabinets. The new house-no sign of mold.

And our house is very low tech compared to what can be built now, just ten years later.

 

[warubuta]

Yeah, but I have to give my wife credit for the choice.

Our walls are not normal walls. They are made of a kind of agar-laced material and designed to "breathe." The exterior is also made of a different material that resists mold. Our neighbors' houses built at the same time as ours, are not holding up as well. Our next door neighbor's house white house is plagued by green mold. My old rental house had tile ofuro, black mold that was impossible to remove. The new house-no sign of mold. In the rental, mold on the walls behind the sofa, refrigerator, and cabinets. The new house-no sign of mold.

And our house is very low tech compared to what can be built now, just ten years later.

That Hebel House looks really good. I dont know about breathing walls, but a Hebel House got built near mine recently. That baby is built to last. Steel framing. Ceramic panels. Super high tech foundation. 100 years easy. Makes me feel like the little piggy in the straw house.

 

[Durg50]

Browsed around the big broker sites you see advertisement for on TV, can't help getting the feeling that what's available there is what the agents couldn't sell through their regular channels (one house, when you read the details, turned out to be build 4 years ago and no one's ever lived in it, been empty since). There doesn't seem to be much available online and most of it is multiple listings for the same place. Guessing either the supply really is low in Tokyo or they usually sell before the agent bothers putting it online.

So need to narrow down some areas, go to the local agents, introduce oneself, tell them what you're looking for and ask them to call you when something's available. Don't have a lot of fond memories dealing with real estate agents in Japan but can't be helped I guess.

yeah general advice is if the house is already built and hasn't been bought yet, its a dud for some reason. many agents told me that, even the ones that had already built houses on their books. At the very least if the place is already built and they are trying to sell it, you should be able to get a significant discount.

 

[MikeH]

yeah general advice is if the house is already built and hasn't been bought yet, its a dud for some reason. many agents told me that, even the ones that had already built houses on their books. At the very least if the place is already built and they are trying to sell it, you should be able to get a significant discount.

There is a plot of land close to where I live and when the old lady who lived there died they demolished the house and split the land in six lots. It has been now three years and they just finished the second house in there; all the other plots remain empty. Other side of the street they demolished another house and build three new big houses; all those are now going to the rent market as nobody seems to be interested in buying.

So I am guessing there would be some good negotiations to be made there; though even if I had the 300 to 500 million at hand I would not be buying here. Normal Japanese houses build to the brim of the lot, no garden at all.

 

[warubuta]

There is a plot of land close to where I live and when the old lady who lived there died they demolished the house and split the land in six lots. It has been now three years and they just finished the second house in there; all the other plots remain empty. Other side of the street they demolished another house and build three new big houses; all those are now going to the rent market as nobody seems to be interested in buying.

So I am guessing there would be some good negotiations to be made there; though even if I had the 300 to 500 million at hand I would not be buying here. Normal Japanese houses build to the brim of the lot, no garden at all.

I wonder if you could buy at any meaningful discount. The landowners and investors in the houses have borrowed money from a bank and need to pay their loan back. At a certain discount they lose their profit. Beyond that they can’t pay the loan. They deluded themselves into thinking that prices and demand will rebound but it never does. Another non-performing loan in a non-performing country.

 

[roots reggae]

So I am guessing there would be some good negotiations to be made there; though even if I had the 300 to 500 million at hand I would not be buying here. Normal Japanese houses build to the brim of the lot, no garden at all.

I turned down many places my wife liked because of no garden space.

Unfortunately for me, when my neighbor's house went up, so did most of the sun. So, I can only have a small summer garden.

It's why I had a 1.5 meter by 3 meter greenhouse built upstairs on the balcony meant for drying clothes. It keeps my hot peppers alive, in containers, during the winter. Then, in Spring, they are moved outdoors.

 

[Sudsy]

300 to 500 million

You buying houses or apartment buildings? (I think you have an extra zero in there...)

 

[Sudsy]

Unfortunately for me, when my neighbor's house went up, so did most of the sun.

You could have actually sued over that. Shade laws generally protect established gardens.

 

[roots reggae]

You could have actually sued over that. Shade laws generally protect established gardens.

Well, not established. Their house went up shortly after mine.

 

[MikeH]

You buying houses or apartment buildings? (I think you have an extra zero in there...)

I am not buying but they are new houses they are selling, and unfortunately just the correct amount of zeros there. The rent is going to be 1.5 million yens per month. For the smallest one.

 

[User#8628]

You could have actually sued over that. Shade laws generally protect established gardens.

He could sue his neighbors for... throwing shade at him.

Defamation law

 

[MikeH]

He could sue his neighbors for... throwing shade at him.

But then his neighbour would have sued Roots for being so cool he sucks the warmth of the land and the neighbours need to wear sunglasses all year around.

 

[roots reggae]

Please, please, don't even joke about bad neighbor vibes. I've heard some pretty bad stories.

In fact, someone should start a Bad Neighbors thread.

There were seven of us building almost the same time. I think mine was third finished. We get along well. The House of Shade has a girl the same age, same middle school as my oldest son. I cleaned up the green mold on the side of their house with the stuff I use to treat my wooden deck. We all shovel snow together on our little shared private road-not even on Google Street View. If any of us go on vacation, another will pick up the mail and newspapers and keep an eye out. None are close friends, but we all get along and respect each other's privacy.

I think I'm lucky.

 

[MikeH]

Please, please, don't even joke about bad neighbor vibes. I've heard some pretty bad stories.

Yep, I think the worst have been killing your neighbour's kid because she was doing better at kindergarten than your own kid.

 

[Sudsy]

Yep, I think the worst have been killing your neighbour's kid because she was doing better at kindergarten than your own kid.

Well, there's the woman who tried to kill her entire neighbourhood, motive unkown....