This topic has been covered a lot and I read a lot about it.
I just would like some opinions and comment on it tailored a bit more, cause maybe it definitely doesn’t make sense what I am planning.
Background:
I am almost 30 and have been in Japan for now 8 years, it was always a matter of “1 more year” but in the end, life was not bad here and I kept staying for X or Y reason. The main thing is me not knowing exactly what I want to do between committing with Japan or going back EU. I am also unsure how the future here will be with all the challenges Japan is facing and I feel for some reason that Europe is a bit more covered on this end.
For the financial background, currently working in IT, with a 6.5M/year, I have a long-time foreigner gf but not yet planning any wedding. And I have around 40M saved (invested around in Nisa/crypto and main bank).
Plan:
Ok, so I am now considering buying a house, I wasted enough money in the past 8 years in rent, and I feel like I want to have something that belong to me, and that I can shape and keep once the mortgage end.
I am looking to buy outside Tokyo (in the Fuchu area) something with a loan to myself only that would from what I looked around and the agencies I contacted be maxed at around 50M in 35years at 0.75% interest rate (due to not having PR, but negotiable to lower once I obtain it.
The plan is basically, buy something new, live inside for as long as I wish (that will probably be minimum 5 years, maximum my life lol) and in the case I get tired or want to go back EU for any reason, then rent it out (I know I will need to reevaluate the interest and there will be expenses in the case I do this. I plan to have at least 3LDK (if possible, need to check) so that it will cover the eventually kid if I ever have one.
Does it sound feasible? Although I checked a lot for buying, I don’t know of the attractivity of such zone for potentially renting if it ends up into that.
I know stuff devaluate a lot, but also, buying used house seems like it would not be worth it in the long run as I would spend more to renovate than just buying new.
People always say all devaluate, now there’s been a raise recently in prices, is it like the worst time to buy? I don’t see why prices would raise further in Japan, feels like is a temporary thing and I might get cheaper later.
Also, I would obtain a PR in 2 years, is it more interesting to wait for the PR and change job this year (to get higher paid one) or instead purchase this year and reevaluate the loan once I obtain the PR?
Thanks for your time and sorry if it’s a bit confusing.
EDIT: Just an edit to Thanks Everyone for the valuable answers and comments, they really help a lot!
by Apprehensive_Horse_8
22 comments
If you get the loan before PR you will pay a higher interest rate and a refinance when you want to lower it after PR. Also any money that is invested (not in a bank account) doesn’t count towards savings when applying for mortgages FYI.
This year I will apply for PR and to get the juicy interest rates.
I think it’s mainly a lifestyle decision. If you see yourself in Japan for at least five years (10 would probably be better), just run some calculations to compare renting vs. buying.
We also bought a house recently. We are also from Europe, similar savings but married and higher household income, and plan to stay long term.
For us, we want to have kids soon and we have hobbies that require more space, so buying a house was a reasonable decision after some calculations.
We had a look at a few (cheaper) new houses, but was a bit disappointed at the build quality. We finally bought an older but better build house.
Refi after PR is a painful strategy. The time and cost it takes to refi is pretty big if you ask me. If your so close to PR better to just wait and get the loan after PR
If your plan involves renting out, always go for an apartment rather than a house.
Houses are much much harder to rent out and also require more direct maintenance.
There are many best practices about buying residential real estate, regardless of which country it is located in. I’d suggest that you go slow, read a few books on house buying, inspect and consider a lot of houses so that you invest wisely and own a property that you can re-sell without a loss, should you need to. With a 10 year investment horizon it may be possible to essentially live rent-free and recoup all your original investment.
I was in a similar situation, but I wanted the option to sell, not rent. My house was expensive, but I know that I will be able to sell it quite easily (in 23 Ku, nice neighborhood, close to train stations).
People say that houses lose value, it might be generally true but after 10 years, I actually think that I could sell mine for much higher than what I paid. Regardless, comparing rent and loan, even with a total loss of value of the building, in the long run it still makes sense to buy.
Also, if I were you I would not discard buying second hand houses. You can save a lot by buying a recent, but second hand house. A friend of mine did that, and sold the house a few years later and made 10 mio profit on the sale.
I think you are in a good situation to buy instead of renting, but the main things I would consider are:
– Triple check the cost and process to refinance. If it is costly or complicated it might be worth waiting until you have PR.
– Make sure the area you buy the house in is the area you want to live in for the next 10 years. Fuchu might seem great now, but what if your job changes? What if you have to go to an office in your current or another part of Tokyo? Will your current or future partner want to live there? What if their job changes? Fuchu might be a great area given your current circumstances, but it is an incredibly inconvenient area for probably 90% of engineers, as the jobs are centralized in major areas of Tokyo, turnover is high (and value of changing jobs is high), and many companies are gradually forcing people back to the office.
Firstly, you didn’t ‘waste’ paying 8 years of rent. Look at this part as a lifestyle choice where it took you that many years to get to a point/location/time in your life where you are mentally and finacially ready to make a purchase.
Second, Japanese interests rates are amongst the lowest in the world, getting 0.75% or getting 0.25% after PR is negligible in the bigger context of life. You get that mortgage when you need it, and when you find the right property. Waiting for PR is like waiting for more cake while drinking your matcha tea, you will get it in time regardless, enjoy your matcha tea at the moment.
In the context of Japanese property dynamics, you should put as little down as possible and use your savings to invest in financial products that far outearns 0.75% per year. Just saving in USD and it is like 3.5% atm. The stock market and dividend subreddits have all the related info for +- 10% annual returns.
Frankly its great reading about young men having their mental headspace together, solving the big life puzzles head on. One day when you have kids, join the daddit subreddit for a different journey. Good luck! 👍💯💚🌏📈🧩🗺🎶🗿⏳👏
“0.75% interest rate”
LUCKY you lol. i am paying **3.37!**
First, congrats on saving 40M on a 6.5M salary, that’s very impressive! Regarding the salary, that seems a bit on the low end for “foreigners working in Japan in IT for 8 years”, so yes I’d recommend changing jobs. If you are not horrible at negotiating, you can get 8M+ easily from where you are. If you are horrible, I’d recommend getting better first! Google “kalzumeus salary negotiation”.
I agree with your statement, first change jobs this year, then you usually need to be working at least 1 year on your new job for PR/mortgage/etc, so by then IMHO it’s worth to first apply to PR and then get the low-rate mortgage. It does delay things 2-2.5 years, but you’ll be saving also a bit more meanwhile, have access to higher ceiling on the mortgage, and get the better rates.
BTW, as a fellow European who has lived in 50-100s year old houses back home, I am a bit confused why you want to “buy something new”. This is one advantage we have, we generally don’t believe in ghosts or spirits of the previous owners. I understand you might want post-1983 for earthquake reasons, but the drop in price from “new” to “slightly used” (5-10 years) is big to warrant not buying new IMHO. Think about it, you can have it new, or slightly used but 10% bigger, or 10-15 mins closer to the center, for the same price.
PS, “the agencies I contacted be maxed at around 50M in 35years at 0.75% interest rate” who offered you that if I might ask? I asked my bank and they said “PR, marry, or go pound sand”.
Glad you’re enjoying life in Japan. I’ve been here for 33+ years, and while I still have a footprint back home in the USA, I will never leave Japan permanently, I think. My only input about buying a home is, understand that the value will fall slowly as the building gets older/dirtier. If you rent it out, in general the amount of rent you can get for your unit is less every year because it’s older/dirtier. This is positively insane, coming from California, but it is what it is.
40M with 6.5M salary – you sir is a wizard! Very impressive.
I am 31, with a 12M salary, but my saving is 1/4 of yours😢 Also buying a house in Saitama, with fixed rate of 1.6% (i just wanna hedge vs the future lol). Naturalized Japanese, and getting a 35 years loan. Honestly if you are willing to go over to Fuchu and with that 40M saving, u can either get a place outright, or put as much money as u can upfront and pay it of in like 5 years? Either way hat off to you man!
If you’re buying a property in fuchu, somewhere close to a US military base (~30-40 min drive), you can also opt to rent the house out to the military if you wish to in the future. So another option if a whole house is not as agreeable to the japanese clients as an apartment. As long as the house is less than 20years old
25 yr veteran living in Japan. Cash is king. Do not buy real estate in Japan. Invest in ETF or dividend paying equities where you get 6-8% per year and 8-10% growth right now. Stay very liquid and wait for interest rates to come down in next 5-years and invest in property outside of Japan in US or London.
Japan real estate will continue to depreciate. Rent is ok. Rent not a waste when you factor in tax, depreciation and maintenance costs. Trust this advice.
Why Fuchu?
Japan isn’t the place to easily sell and move without losing money.
You talk about maybe starting a family are you thinking about ASIJ maybe.
I suspect getting PR gives more chance to get a second hand place without throwing in 50% deposit. Probably still need 20 though..
Land appreciation has pushed prices up. Check tochidai for the areas you are considering. It’s probably not sustainable but who knows for sure.. to play it safe make land 70% of your purchase and get some place you can walk to a station with multiple lines. Even if that’s a 15 min walk..
Regardless of any financial matters , here are some important but less obvious points about selecting a house that others would eventually want to buy from you:
a) spend some time inside the house sitting alone quietly with the AC off and the windows open. Outside noise is easy to not notice when all windows are shut , after you’ve moved in and try to enjoy fresh air , you can realize it’s too noisy outside.
b) you should really know where flood waters go during heavy rains
c) you should know where the sunshine and shadows are and what may interfere with your sunshine in the future .
Through my job I interact with lots of new builds and renovations. My general opinion is a standard new build is of relative low quality as homes are seen as disposable. So many short cuts are taken.
I lived in 2 renovated properties and a new build. Both have pros and cons.
Older homes you can basically get for the cost of the land these days. This frees up your budget for a decent renovation. New wallpaper, flooring and a European kitchen. Tiled or unit bathroom, you can open up rooms etc and finish well under the cost of a new build. Banks will give you a double loan purchase and reform. You could have quite a decent custom redesign at half the cost of a new build. The cons being it’s still an old home and there are lots of things to consider like heating/insulation, roof and siding condition. How much of a renovation do you want to carry out. The reform loan process is a hassle as the bank will pay the builder so you need to have a reform quote first.
But there are many low cost ways to make an old house look quite modern.
A new house, there are only a few areas in Japan where you will experience any appreciation. But at least they are warm and have good insulation lol.
You probably should look at a new house like a new car. They will depreciate which is fine for some people.
There’s no simple answer as everyone has different circumstances. No family, young family, kids left home etc. in my situation my next home I plan to just rent.
Renting is not wasting money
which bank gave you offer for mortage 0.75% for 35 year loan? You have very very similar situation to me. as if I wrote the post. Interested to see how this turns out.
Makuhari, Chiba is outside Tokyo. And is affordable around 50M.
It’s very close to the sea.
I got 1.6% haha – fixed rate + 0.2% insurance policies
If it is even going to be worth it, I wouldn’t buy new. Find a really solid structure that was built well, not too old if possible (like only 10 years old or less), near a station where the land value is high.
Even if you buy new, you will have to renovate anyway in 20 or 30 years because there is not enough demand for houses older than that. Not to mention the quality of tate-uri is very cheap, not long lasting quality at all. Everyone likes to live in new or newly renovated clean places, and most of them have a lot of them to choose from (for renting).
People are willing to sacrifice on quality a little bit if your location is conveniently near a station.