Hello, I’m looking at the second hand house market. I’m looking for a detached house and I came across one priced at 1980 man.
Now I’ve looked up the average value of land in the area and come up with an approximate of 425 man for the land price.
The building is 26 years old and wooden construction, which according to the government is worthless. So now I’m wondering what components go into the house value to make up that difference of 1555 man.
Of course there are the amenities in the house such as the kitchen, flooring, boiler etc. I imagine that these things are probably considered separately from the “worthless” building structure. I would also imagine that unlike the land and structure component of the value, there is scope for seller’s discretion in these other components.
Can anyone shed some light onto what goes into the full value? Am I just overthinking this? I just don’t want to blindly pay 1980 for something that would be considered by most to only be worth the value of the land. Thanks.
13 comments
If it has been remodeled and passes all inspections, then it could give some boost in value.
> The building is 26 years old and wooden construction, which **according to the government is worthless**. So now I’m wondering what components go into the house value to make up that difference of 1555 man.
One thing to point out is that just because you and I know about how depreciation (on the books at least) works, doesn’t mean other people know about it.
I wonder if it’s worth getting an independent valuation done
Two things:
1. Location – you have looked up the average land value in the area, but is this location more desirable than most around it, if so the value will be higher.
2. existing structure – even if the house is considered worthless under governmental/tax depreciation guidelines, rarely is a structure worthless unless it is unliveable. Was this house well built in 1997? If so it probably is fine and it may have been reformed and upgraded at some point. Definitely get an independent review done if you are considering it.
> Now I’ve looked up the average value of land in the area and come up with an approximate of 425 man for the land price.
How did you look this up? The land value for property tax purposes, like listed on [ChikaMap](https://www.chikamap.jp/chikamap-sp/TopPage/Index), is not the market value – it’s typically much lower. The only good way to get the market value is to look at past sales.
Simply demand and offer. Someone can remodel it and live in it. Cheaper than building new in the short run at least.
This is the same way you can depreciate a laptop in your books over 2-3 years and make it “worthless” in the books, bit its still a 2 year old macbook pro ultra mega thats worth still quite a lot on the used market. Think about it in that way.
A link / property posting or every comment is a wild guess on a weird tangent.
The average in an area is a bit of blunt tool. According to the average in my area, our home is worth around 20% more than we paid 8 years ago, but I kind of doubt it just looking at what the new construction is going for around here.
Before we bought, we looked at the idea of knock-down and rebuild and I can confirm that just because people say the house is completely worthless, that’s not what actually happens in the market. I remember one place where we talked to an agent and actually used an argument like that and he said, “well, they just put in some (cheap) linoleum flooring, some new wallpaper and tatami. It’s a common $10K fix up a lot of people do before selling to keep the price up. He’s not going to sell for land value.”. So clearly there is a used home market despite what I consistently hear both from foreigners and Japanese about no one wanting them.
If the house is livable, then it’s not worth zero. That term gets misinterpreted a lot. It’s only zero in terms of accounting.
It may be “worth 0” as in banks won’t finance for the cost of land+house, only the land. That was the case for me, bank would finance for the land but not the structure.
If you’re willing to use that house, and you can get a bank to finance you with a loan that’s enough to cover the cost for everything, you’d be fine.
Part of the reduction in cost for the land+house may be that the seller is taking into consideration that buyers would want to tear down the house and build a new one, which is quite expensive.
Here’s some simple stupid math:
Take the value of the land and half of that is the value of the house.
I strongly suspect you are looking at something incorrectly.
Because it would be unheard of for a 26-year old propertly to be worth ~3x the price of the land it’s sitting on. Something isn’t right.
Are you sure you’re not looking at the price per tsubo? 4.25 million yen per tsubo – that would be a lot more realistic.