Hi all,
Currently looking at potentially building a place down in Tsujido, budget all in around 120mil JPY. Our thinking is we can get the convenience of living close to Tokyo with the space/comfort of a larger property near the coast.
My main concern is the resale value on housing in Japan – we’re likely to move out of Japan in 10 years when the kids get older (unless we can afford to put two kids through international school by then). However everything I’m seeing is telling me that we’re going to lose a ton of money when we sell given how house prices depreciate. Anyone have any experience with building and subsequently selling their property? Is this really the case?
If buying land and building is a financial no go, our alternative is to buy an apartment, which will likely end up being in a more urban area closer to the city centre. I’d rather build something that better meets our preferences/needs but want to understand the risks first.
Thanks in advance!
14 comments
Houses are for living in, not selling for profit.
Build your dream home or whatever and when you don’t want it anymore sell it at a fair and reasonable price to someone who does.
If you can afford a 120M JPY house you can probably afford International School?!
As I read it (but could be wrong)
House values in Japan decrease a lot more than anywhere else in the world. So yes you will lose value with that but might recoup some with taxes. (At least I read that, some put the decrease in value on their tax report but maybe only for financial property)
On other hand, the land value will / should increase which might balance thinks out.
You should take note on land value versus structural value, not just for reselling purposes down the road. It is also crucial when it comes to tax planning and calculating depreciation. If you are spending a lot of land and little on structure, and have a good grasp of the particular local market (think about why people in that area want to use land for), you might have something financially viable going on using it for just 10 years,
Judging from your budget and location, if you are going for a big family style house, with more than 5 bedrooms and a bunch of amenities, that is indeed not going to be popular in the Kanto market close to Tokyo. You might not have good luck attracting competitive buyers from a market perspective, on top of the fact that structures themselves lose value very fast.
Yes, you will lose money if you try to sell your house in 10 years. Houses in Japan actually depreciate in value unlike other countries. After 10 years your house will still have some value but less than you paid for it. The land however will likely hold its value. Tsujido is a nice area to live in – close to the coast and to Yokohama and Tokyo. It’s close enough that your kids to commute to an international school in the future.
Look at market prices in your area on suumo and that should get you an indication of age price and location for the area you’re looking. Next neighbourhood over from ours a second hand house goes for what a new build costs here so market value and tax value are different things
IMHO, it is hard to predict. Tokyo and N. Yokohama will continue to do well, but not only are you facing headwinds of poor used home resale value, you are also facing another 10 years of population decline (lower demand) and a few million more akiya. But Kanagawa will continue to be much better than the rest of Japan so it may not matter.
If it were me — and I realize everyone has different priorities — I’d want something closer to Tokyo if I were spending that much.
Not only do houses depreciate, but don’t forget to factor in all the transactions costs which are gone out the window.
I mean.. I wouldn’t call 40 minutes station to station as close (if we are being generous and calling Shinagawa as somewhere in Tokyo you’d want to go). That’s a long ass time to be standing on a packed train. Plus the time to and from.
Apartments hold their value a lot better than houses (they are increasing even). No one wants someone’s old house other than other foreigners. Apartments are considered fine for some reason *shrug*.
I think there’s not much to do except to create a spreadsheet and estimate how much you might gain or lose in 10 years with both options.
E.g., maybe you crunch the numbers and see that with depreciation, fees etc. when buying and selling a house you might lose 5% over 10 years.
Then also compare it with buying the apartment and then selling an apartment, which if closer to Tokyo might actually appreciate.
Then compare the two, What if the delta is just 10%, maybe that’s an acceptable price to live in your dream house? What if it’s 20% or 25%? With some estimates at least you can make somewhat of an informed decision.
Also plans change. Maybe in 10 years you’ll find that the local schools actually aren’t so bad, the kids have precious childhood friends nearby, everyone loves the neighborhood, and you’ll want to stay anyway.
I’d expect to lose 25-50% of the value. 120m in Tsujidō is a very specific type of buyer and you will certainly have trouble finding them. Are you ok to sell this to someone for 60m in 10 years? If that’s something you can handle then go for it.
That is a looooot of money for the burbs and I think you would have a very hard time trying to sell that for anywhere near what you are paying for it. Anyone who can afford that sort of house out there will likely want a custom home for themselves.
What’s the value split between the land/house? You should also look into land value in the area over the last 10+ years, is it consistently going up, stagnant, depreciating?
We’re in the process of building a house in Tokyo and the total cost will likely end up being about 110M. In our situation though the house itself is less then 20% of the cost, it’s going to be a small 85sqm 2SLDK, 3 floors with a garage.
We’re expecting the house to lose most it’s value so the investment for us is the land. The area where we’re building is about 10 minutes by local train to Shibuya station. Over 10-15 years we expect the land value will offset the depreciation of the house. So if we decide to sell we will likely get back most of our investment.
I’d do the math on expected depreciation, and if it (interest + depreciation + ownership costs) is materially higher than cost of rent of a similar property over ten years then I would rent instead.
If building a house of your dreams is a life goal you want to check then you can decide it’s worth the investment.