I come from Ireland, where we’re obsessed with home-ownership. Call it a hangover from centuries of unfair treatment by foreign landlords, call it our post-famine DNA that leaves us collectively enamored with personal security — whatever it is, we’re a nation that just can’t seem to settle into renting. This is why I find it so fascinating that Japan takes the polar opposite view on buying your own place.
If you have the money and see Japan as your long-term home, the temptation to buy might be strong. After all, many of us have been raised to view rent as “dead money”. Japan is different. Buying a house in Japan is, to put it frankly, a really poor financial move – as evidenced by the fact that Japanese home-ownership rates are approximately thirty percent lower than other similarly developed Asian countries. In this article, I will go into detail on the various points that make the property a depreciating asset in Japan – and why renting is a far more clever idea.
If, after considering all this, you still feel you want to go ahead with property purchase in Japan – good for you, and the best of luck with your new chapter. However, go into it with your eyes open to avoid disappointments down the road.
Japan has had more than its fair share of natural disasters over the years, and this shows no sign of letting up. From earthquakes and hurricanes to tsunamis and tycoons – the climate is unpredictable, to say the least. Even if your home survives these likely events, it won’t escape unscathed. You might soon find yourself longing for the convenience of the days when you could pack up and head on to another rental property when the going got tough.
In order for a market to remain viable, a healthy relationship between supply and demand is required. Japan has an aging population, and the number of older people dying and leaving vacant properties outweighs the number of young people looking to purchase.
This means there are more houses on offer than people looking to buy, which significantly reduces property value. You might see this as a good thing for you as a buyer – and, initially, it may be. You could pick up a beautiful home for a fraction of what you might pay in another country – happy days, right?
Actually, unless you intend to live out the rest of your days in this property (which might not even be possible, as I’ll explain later) this imbalanced market is not in your favor. If you ever want to sell on your property, it will be one in a long and ever-growing list of vacant buildings – so don’t expect for it to be snapped up, or to make any sort of profit.
Not Built to Last
There’s an old saying that houses in Japan last 30 years, and part of the reason that this rings true must be attributed to the building materials used. Japanese houses are generally constructed using timber frames, which must be carefully maintained lest they fall prey to termites. Even with a careful owner, timber-framed houses are simply not designed to last the long-haul – with a projected lifespan of approximately 30 years.
When you consider the fact that your timber building is aging from the moment of construction, you can understand the rapidly depreciating financial value of the building. In this sense, buying a house in Japan is similar to buying a car elsewhere – once it’s been used, it’s instantly worthless.
Culture – Houses Aren’t Passed Down
In Western culture, houses are often an asset passed down through generations. Indeed, many a family has fallen out over who should inherit a descendant’s property after they pass away. This is not the culture in Japanese families.
Couples prefer to move into a new place to begin their lives together – partly because of the concept of waki-are bukken. Waki-are bukken dictates that bad spirits and memories can live on in a building long after their previous owners leave – making the inheritance of an old building especially risky.
If you’re hoping that your Japanese house purchase is something you can proudly pass down to your children, you might be in for a nasty surprise.
Difficult to Insure
Combine regular natural disasters with highly flammable timber frames, and you’ve got a high-risk property on your hands. The insurance on a purchase like this is understandably astronomical – and that’s if you can even secure comprehensive insurance.
Many insurance policies will have exceptions for particularly likely sources of property damage – meaning you as the property owner will end up footing a hefty repair bill when the inevitable does occur.
House Demolition Culture
You might be shocked to hear that many Japanese houses are simply demolished after the original owner leaves, with a new property erected on the land if required. There are a number of reasons for this, including the fact that building regulations regularly evolve to meet the safety standards demanded by Japan’s precarious climate. The property that you poured time, effort and money into putting your own stamp on may not even exist in a few years’ time.
Depopulation of Areas
If you’re buying outside of the major urban hubs, you can expect to see gradual depopulation in your area as the aging population dies. You might think, great – that means more space, less noise and traffic, and just a generally slower pace of life. To some, this seems idyllic.
However, a big consequence of depopulation is the shutting down of amenities in the area. You might move to an area that is sold to you as having good schools and convenient local stores, only to find that these facilities are barely surviving and may soon be shut down. This not only affects the resale value of your house, but ultimately the liveability of your house’s location – you could be forced out by the sheer hassle of living in an area that is slowly shutting down.
Changes in Housing Trends
In a country as rapidly developing as Japan, it stands to reason that housing trends are changing in accordance with the needs of citizens. One such example is that Japanese people in urban areas are choosing increasingly to live in “social apartments”. These communal living spaces have proved popular amongst busy career people who are eager for company when at home.
Who knows what accommodation will prove most popular in the next decade? Is it really wise to tie yourself into a property that may fall out of favour in the near future?
Poor Resale Value
Combine all these factors and you’re left with one overwhelming result – poor resale value. When you buy a house in Japan, you are stuck with that house. Nobody is going to rush in to take it off your hands if you decide to move back to your country of origin, or if your family grows and you need to upsize.
What About Buying as a Landlord?
There is an argument to be made for buying an apartment in a city like Tokyo or Osaka and renting this out. Many argue that because the population in these large urban areas is only likely to increase over time, there will always be a market for rentals.
This is true to an extent, but one must take into account the fact that having tenants gives the homeowner a whole new set of responsibilities and potentially, expenses – no different from the rest of the world. The problems with insurance for natural disasters still remain.
So Who Should Buy?
If you have your heart set on buying, then buy purely for yourself. It’s very much a heart rather than a head decision – buying in Japan makes little financial sense.
If it makes you feel like you’ve really made Japan your permanent home, and you relish the thought of putting your stamp on a dream house – go for it. If you can accept the idea that your house might not be a “forever home” and the catch that comes with the cheap purchase price is that you may have to walk away without any comeback from earthquake damage – then go ahead.
If, however, you’re trying to turn over a profit upon resale, or hoping that the purchase will make your children’s lives more financially secure; buying in your country of origin and renting the property out while you’re in Japan is a more logical choice.