Renting vs Buying House

Happy friday guys 🌸

I was curious to hear why you would prefer/choose to buy or rent house here ?

I am trying to figure out pros and cons.

I heard opinion from few people that buying is bad idea if we leave Japan in short time( approx <5 years)

Some say if we buy house we get bigger place with similar monthly fee that we pay towards rent.

Any other perspectives you guys would like to share?

Thank you.

32 comments
  1. Housing in Japan generally depreciates. So you won’t be able to sell up if you leave. You won’t get back the money you invested into it. Houses are not investments here.

    The main reason to buy vs sell is that monthly payments can be the same as an apartment but with bigger living space. However you will have a bigger down payment. Plus, if you want to do any interesting customize the house, you can usually only do it with a property you own (since most apartments don’t allow painting walls, putting holes in the walls, etc).

    Another thing to consider is if you (or your spouse) have permanent residence or citizenship in Japan. I think it’s pretty difficult (if not impossible for most) to sign on a housing loan without one of these. That means you need enough cash down to buy the house outright.

    So unless it’s generally not recommended to buy unless you are buying your forever home or you are just totally loaded and money isn’t a factor.

  2. This is a long conversation that you should be having with a realtor you trust because the answer will depend on a lot on personal information that you should not be posting online.

    Let me just say this. It is hard to get exactly what you want as a renter in Japan because you will be at the whim of Japanese owners and their conditions, but if you buy something and then later rent it out, you will be helping future foreign residents by providing one more foreign friendly rental that meets their needs.

  3. The biggest issue I’m personally having with owning a house is that you’re stuck.

    I chose a nice “countryside” city. But job opportunities are pretty much nothing. I currently commute to the next town which is about 20min by car. Any other job that I qualify for will turn into an expensive and distant commute. At least and hour and a half one way into Tokyo or the next big city.

    I honestly thought I wanted to stay at my current job until retirement but I’m constantly thinking about ways out.

    Owning a home is great with kids because you can be louder than renting an apartment and also I don’t have to pay for parking. I can customize my house and change it the way I want. I also have solar panels which save me in electricity costs.

  4. Renting.

    I dont care about what is most financially beneficial, i just prefer the freedom of not having to deal with the fact of owning a house. That in itself is worth so much more than the hassles of buying, and potentially selling, renting out or whatever is needed, in the case that your life will not be static for the coming decades.

    Its not like youll become rich by simply owning an apartment here (as the market has been in europe etc before). At best it may be a slightly financially better deal, but the effort is not worth that small amount of money unless youre really struggle with the financials.

  5. If you stay a very long time, then buying makes sense.

    Less than 5 years probably isn’t long enough to make buying selling more cost effective than renting.

  6. It’s a good idea to buy a house if

    * you plan to live there for the rest of your life
    * you don’t mind getting stuck with it for years if you have to sell it
    * you can buy one with a high resale value such as a house in a very good school district or a condo in the middle of a big city

  7. If you buy a house:

    * You pay off your mortgage month by month. Once you finish your payments (depending on the length of your mortgage) the house (and the plot of land it stands on) is yours.
    * Owning a house is nice, but you will need to set aside money for maintenance.
    * You might want to sell your house at some point down the road. Be aware that several fees will need to be paid. The realtor will pocket up to 3% of the value on sale (仲介手数料.) Because of these fees, buying a house and selling it again in less than 5 years will most likely result in a net negative for you. Also, this being Japan, people don’t like the idea of buying a used house. So if you ever end up selling I highly recommend renovating the place and making it look like new. If you take care of your house it’ll last a long time.
    * You loose mobility. Changing jobs/cities will be hard. That’s one of the reasons house buyers are mostly young families who relish the stability/space/security and are ready to put down roots.
    * You gain freedom in respect to what you can do with your living space. Want to add an indoor swing? Go for it. Want to build a wood deck in your garden? Sure, why not!

    If you rent:

    * You are free. You can move around and do whatever you want. Great for Job mobility.
    * You can move back to your home country whenever you want.
    * No maintenance costs (you don’t need to pay for the new water heater out of pocket.)
    * 30 years down the road, you won’t own the place. However, the mobility might pay off in getting you a bigger salary in a different city.

    Personally, I went the house owning route. Because I have a young family and no plans to leave Japan anytime soon. I’d recommend buying a solid second hand house (better bang for the buck compared to a new house in the same price range. Also lower 固定資産税 since this tax is calculated from the age of the house.)

  8. My wife and I bought an older home in Otaru last year. Overall, I’d agree that buying doesn’t make sense unless you’re going to be here long-term. You also need to be *very* confident in your Japanese abilities, because it’s not just the real estate transaction that will test you: there’s maintenance, things breaking, contractors, neighbor relationships, city/tax stuff… owning a house complicates your life a lot and you need to handle all that stuff in Japanese. I think the same is true for house-hunting, actually. If you’re looking for one of those akiya or “near-akiya” good deals, you’ll need to be able to converse fluently with tons of people/departments AND do enough research (in Japanese) to discern a diamonds in the rough from a dud… and there are many, many pitfalls. Construction defects in older homes, code issues, land issues.

    It’s all very rewarding but lots of work. Good luck!

  9. My pros are that I’ll have cheaper rent, less hassle finding a newplace every few years and also somewhere to live when I retire. Cons are moving around becomes a huge stress instead of a medium sized stress.

    Depends on your plans for the future.

  10. I bought a used condo in Tokyo and helped my family buy a house in Australia in the same year. Within one year, the house price went up by 100k in Australia. That will never happen in Japan. That’s why people say buying in Japan is only beneficial if you stay here long term so that you save on rent. If you know anything about real estate in Australia, house prices doubled up within the last ten years.

    However, tenants in Japan are quite disciplined and look after rental properties well and pay the rent on time even though they can be demanding about other things. . If you must buy, the most important factor is location so that if you need to move, you can easily rent it out.

  11. I own two properties in Japan and rent a third (my primary). I also speak with many of my native Japanese friends on their experiences (owning and renting).

    You are going to get wildly different answers here as everyone has unique situations, locations, budgets, backgrounds and needs.

    Location and scarcity, like any other country, is the key driver for home prices — now and in the future.

    In an extremely broad sense, it is absolutely true that houses depreciate quite rapidly in Japan. Japan has one of the highest vacancy rates of homes in the world. Even in my neighborhood several homes (30 years old or so) have been demolished and rebuilt in the last 8 months (4 on my street alone).

    House #1 – Fully paid for and fully depreciated. I rent it to family for a nominal amount and it will never be an considered investment. On my books it is simply a future liability as it will need to be demolished and rebuilt to have any chance of being sold. The house is next to it is a akiya in-the-waiting so I’ll likely snag it at that time and demolish them both before rebuilding.

    House #2 – Large estate property and historical home + annex house. Sadly a earthquake damaged both proprieties several years ago and I had them both demolished (the beams were upcycled into another traditional house). I converted part of the property into a neighborhood parks for the local kids and the rest into rental parking (and a small section for takenoko harvesting).

    House #3 – I rent at significantly higher cost than my home country. But I’m also relieved of any other maintenance responsibilities. I use the properties in my home country for investment purposes and the one here in Japan simply as a comfortable place to live. Financially, it is far more profitable to invest (mortgage) outside of Japan where home values rise beyond the cost of the mortgage.

    Many of Japanese friend’s parents ultimately regretted buying homes now that they are in their 70’s. It was great back the heydays, but now they feel they wasted all that money given that their homes are now liabilities.

    If you plan to stay long term or forever, it is probably less costly to own — but you do need to factor in that you may need to rebuild in 30 years if you plan on selling/moving.

  12. True, buying a house here is a good choice if you are planning on staying five years, preferably more than that. Mainly because of the very low interest rates makes it affordable. I would, however, seriously look for an “akiya” house or another house that may not be considered desirable by Japanese for whatever reason. They are out there and priced accordingly. You might check out houses that are built on leased land. It may make sense for you. Best of luck. One piece of advice. Don’t build one.

  13. Really simple. If you are mature enough and dead set on staying here plus you are in a position to afford yourself a nice place, just do it.

    If you have any hesitation about your future in Japan and prefer to enjoy the flexibility of being a renter, just don’t.

  14. I’m a buy only kind of guy, so I say buy. I’ve made money on every house I’ve owned and I can’t imagine paying for something I’m guaranteed to lose money on.

  15. You like to move often? Then rent.

    You want to live there long term? Then buy.

    You want to turn it into rent unit? Then buy

  16. I wouldn’t advise buying anything if you are going to be here for less than 10 years, unless you are wealthy enough that losing millions of yen is inconsequential to you.

    If you are going to be here for longer than 20 years you should seriously consider buying.

    Between 10 and 20 years is a crapshoot. You might end up breaking even or even coming out a little ahead, but you could also end up losing a little after covering all the fees.

  17. r/JapanFinance I think there’s even an F.A.Q. for that.

    Roughly speaking, annual expense to own is ~5% of purchase price: property tax, mortgage interest and principal repayment, insurance.

    Meanwhile price-to-rent ratio is really very high high in Japan.

  18. “It depends”… on many things.

    Can you get a loan? If you can’t, then you would need to pay it off in cash… in some cases, you can get better returns on that cash investing it elsewhere.

    One “advantage” of buying property, is the depreciation (of the building) can be used to reduce your taxes… and to some extent, you can set the rate (but it’s locked in from that point onward). This is something you will want to discuss with an accountant and plan in advance, because at a later time when you sell, the depreciation that you claimed will be a factor of how much capital gains taxes you will be liable for. If no depreciation was reported, a mandatory minimum depreciation is added nonetheless.

    For residents, short term (owned for less than 5 financial years) capital gains tax is about 30.6% + local inhabitant tax of about 9%. Properties that you have owned for more than 5 financial years, capital gains tax is about 15.3% + local inhabitant tax of about 5%.

    If you are living in the property (purpose is residential), withholding taxes are not included if the transaction is less than JPY100M.

    Local inhabitant tax is waived if you are not a resident as of Jan 1, the year that the property is sold; To ensure that a non-resident files capital gains tax, the buyer will need to withhold 10.21% (20.42% for leasehold) of the sale price , which you can claim back by filing the correct papers.

    On the other hand, if you decide to move somewhere else, you might not quite be “stuck” as others have shared. One possibility would be to rent it out and generate passive income instead. You won’t be able to do this if you’re on a residential property loan, but if your bank allows you to change to a (higher-rate) investment loan at that time, you can then engage a property management companies to handle it for you. Most of them have a pretty modest fee (5% of rent; 0.5 to 2 months of rent for a new tenant/contract renewal – usually “hidden” away as part of “key money” that the tenant pays).

    Aside from the purchase/acquisition price, keep in mind there are ongoing costs to the upkeep and maintenance of any property – if you were renting, it’d all be “built into” what you pay every month. As an owner, you’d need to pay property taxes, as well as set aside a “repair/maintenance” fund. Most mansions have a HOA, who have a maintenance plan, and would collect that monthly, and forecast any increases as required; but you’re entirely on your own if you purchased a house. Fresh coat of paint every X years, new roof every Y years, etc.

    IMO, one of the larger risks of property ownership is, being able to make the mortgage payment every month under all circumstances… if you lose your job, fall critically ill, have an accident and become unable to work, or any other reason at all – including if you die; that liability doesn’t go away, and you should (must?) have some safety net in place to protect the asset, as well as your family.

  19. Bigger space for similar monthly fee is quite correct. We pay a few hundred dollars more per month for twice the space, solar, insulation, large kitchen and everything we wanted. It’s a lifestyle investment though not a market investment. You should be PR or similar status to get a mortgage so it’s definitely not a < 5 year option.

  20. It depends how long you intend to stay here.

    We bought a house, because we’re not moving anywhere, and would rather avoid worrying about rent if I retire.

    The mortgage repayments are about the same as what we were paying for an apartment.

  21. In my own case, I’ve got enough savings to buy a *decent* house outright/cash, or make an enormous down payment on a nice/newly-constructed house.

    That said, I am and intend to remain a renter, for a few reasons:

    1) throwing a huge portion of my life savings into something that could be destroyed by earthquake/fire/typhoon … anxiety-inducing.

    2) Japanese landlords, in my experience, are awesome. I’ve lived in three rental properties here since 1999. Never had rent increased on me. Current landlord comes around once a year asking us what we “need” as an improvement on the property (some kind of tax write off thing for him, no doubt). We were like, “everything’s fine,” but he wouldn’t take “no” for an answer, so we got a new aircon installed in a room that we hardly ever use.

    3) if I were to go with a mortgage, it’d likely be 30-35 years, during which time I will almost certainly die. I’ve got kids to whom I could leave the house; but “used” housing here is such an albatross that bequeathing an old house to them might be more of a liability/PITA than an asset.

  22. I calculated that the “break even” time was ~7 years, assuming no change in land value for my first mortgage. Less than that and you mostly just give money to the bank to pay the interest.

  23. Once I decided to stay in Japan forever, I switched from renting to buying. I would never buy if I were going to leave Japan

  24. Got fed up with renting in the city, moved to the inaka with my wife, figured as we were 30ish years old it would be a good time to take out a 35 year mortgage. My mortgage is cheaper than what i was paying for renting the apartment. House is 4 times bigger and i can upgrade parts of the house without needing permission. Only drawback is i’m stuck in the inaka. I’m here for the long term so it made sense.

  25. It really depends on your purpose and personal situation
    Pros : Have a soild spot for residential registering of local municipal
    As a foreigner avoid worthless negotiating with landlord or agency
    Encourage to buy some pursuits without think about 引越

    Cons : Jp is a population shrinking country never treat it as a investment
    Have to pay property tax fees

    For my chioce, I’d like to buy a second hand middle size condo or apartment like with
    concrete mainframe structure ( you can find a lot those built by buble over-infrastructure
    80s) with a same count for management fees and taxes

  26. Entirely depends on your needs, life circumstances, your finances, on the property, and on the location. Any guidelines or tips folks give you may or may not be entirely wrong for your situation (including “not worth it if you intend to stay for short term only”). Sure, the shorter the time horizon, the more expensive will be since the ***act*** of buying and selling itself is expensive, a few million yen of fees over by 3 years might not be a good deal but still might be worth to you. Selling on a 4-6-8 year time horizon is perfectly normal anyways as kids come and go.

    Need to decide how much you value freedom of easy moving vs. freedom of doing with your house whatever you want. Are you looking for something customized for your needs or just a random place made for generic usage? If the first, how long until your needs will change? What kind of loans do you qualify for? In certain situations you are getting free money since tax rebates can be higher than the interest. What kind of rental places are available for you in your area (for example a foreigner with 2 dogs and a vehicle might see their renting options quite limited)? What your end goal would be with owning? Preserving value means investment in maintenance. Do you or your spouse have sufficient enough language skills to negotiate with a plumber? Are you financially diligent enough to set budget aside for renovations and fixes plus deal with taxes? Are you really aware of the costs of maintaining a house (you only mention fees which is just one part of the picture)? What is the demographic and business outlook in your area? Land can appreciate quite a bit in desired locations even in relatively short terms.

    And probably a lot more questions. Once you have some answers, time to whip out the excel sheet and do some calculations and see how you like the numbers.

  27. The 5 year advice is real.

    When you buy a house here you’re paying taxes, agents fees, loan fees that all add up to a few percent of the full value of the house. This is money that is instantly lost on any equity you gain vs the loan value.

    Then theres the issue of the value of the house deprecating to zero over 20-25 years. The land itself retains value(at least if you bought in a reasonably desirable area such as tokyo). So its not like other countries where houses gain value and are an obvipus buy.

    It is true that you get more house for the same monthly payment than you do renting. Basically as time goes by the monthly savings and improving equity vs debt balance will put you ahead of renting but that can take 5-10 years(depends on where you got the house as well as other variables. Breaking even on a used house that has already deprecated is quicker than an old house).

    Owning a house comes with the benefits of being able to do what you want with it too and provides stability. But it also ties you down.

  28. We bought. Makes more sense to put monthly payments into property we will own, rather than in the pockets of a landlord.
    Our kids will eventually inherit the land, and they can do whatever they want with it. Land that’s desirable does go up in value over time, even if the house itself is worthless after 30 years.

  29. I’ve been here over 15 years and still have my options open on where I want to retire in 10 years or so.

    I seriously considered buying, but even my wife disliked the idea of being locked in, and she wasn’t even thinking about fees on both ends. We like the freedom to go wherever, whenever, including out of Japan.

    I consider the 60+ renting challenges, but I feel this will be changing. Almost 30% of Japan’s population is 65 or more, so things will have to change, just like the upwards creep on the max retirement age of 60.

  30. Buying is almost always cheaper monthly payments when you go beyond a 1LDK. For example, the rental prices for my area for 3LDK to 4LDK is 500,000 -700,000 while I pay only 250,000 monthly for 35 year fixed while able to write off 500,000 in taxes each year. As long as you buy in a good area, there’s not so much risk of the prices falling. Also when you get older, less and less landlords would be willing to rent to you

  31. Save up 3-5M yen.

    Buy a house in cash. No, it will not be pretty but it will be livable. It’s comparable to a share house, but you’re the landlord and the only tenant.

    Enjoy your full paycheck.

    Need to move later? Sell the property, get your cash back, and repeat the process.

    Enjoy doing anything you want on your property.

    Enjoy telling the NHK dude to get off YOUR property or you’ll call the cops for ハラセールス.

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