is buying a house such a bad thing?

[Taro Toporific]

Debito also has a great four-part essay at his website.

WARNING: In general Debito-san's advice is great. However he has many incorrect ideas of the best practices in Japanese building (he's 110% WRONG on the most cost-effective ways of insulation).

[Catoneinutica]

WARNING: In general Debito-san's advice is great. However he has many incorrect ideas of the best practices in Japanese building (he's 110% WRONG on the most cost-effective ways of insulation).

Quite so. One recommendation of his I plan to follow when we build our next house in Japan is going to the US and buying all the cabinets, doors, windows, stairway kits, fireplace mantles, etc, and ship it over to Japan in a container. Builders here seem to charge a markup of about 300% on imported things like this. Case in point: a lock-set that you can buy at Home Depot for $550 had a price of 180,000 in our J-builder's catalogue.

Debito is also big on hiring a consultant to supervise the builder. Probably a good idea.

[Taro Toporific]

Debito is also big on hiring a consultant to supervise the builder. Probably a good idea.

Ship EVERYTHING possible from the Real World--- only 35% of Japanese building costs are framing, taps, and foundation. For example, Japanese windows set the standard for the WORSE IN THE WORLD price/quality ratio. Japanese kitchens are criminal CRAP which ought to grounds for an immediate execution of the J-builders. Ditto for Japanese dogshit ideas of what proper plumbing and electrical wiring is.

Bottom Line: Japanese involved in housing should enjoy the sulfur onsens of lowest sump of Hell for their treatment of the Japanese public.

[Mulboyne]

Face it, though: housing is a depreciating asset in Japan, a consumption good and not an investment, as we tend to think of it in the west.

Real estate is certainly regarded as an investment here in Japan just as it is elsewhere. You might just be pointing out that the structure itself is not the investment as it is in the west which is certainly true. There isn't, though, anything inevitable about negative equity in Japan.

[Catoneinutica]

Real estate is certainly regarded as an investment here in Japan just as it is elsewhere. You might just be pointing out that the structure itself is not the investment as it is in the west which is certainly true. There isn't, though, anything inevitable about negative equity in Japan.

If the structure itself is not the investment, then you're left with the land - and what has been the trend in land prices in Japan over the past 15 or so years? (I'm not convinced that the last few quarters represent a turnaround.)

I would certainly love to see some statistics regarding collateralized equity in Japan. Anecdotally, I hear only about negative equity when I talk to Japanese: They buy a new mansion, five years later the price has fallen by 25 - 33%, 10 years later the price has fallen by half. Indeed, the place we're renting in Kaihinmakuhari sold for 80 million yen when it was built three years ago; Mitsui Rehouse flyers now list identical units in our building for 55 million yen. Quite a depreciation in a period of supposed economic recovery. I'd certainly hate to be the owner.

Or consider the person who builds a crappy J-home on a 50-tsubo plot of land near a suburban station. The structure might cost around, say, 30 or 40 million yen, but whatever the cost, the bank considers it to have depreciated to zero after twenty years. How could negative equity NOT be the result in such a (typical) situation, barring a huge increase in the value of the underlying land?

I'm speaking purely as a layman who's been able to make money flipping houses in Seattle, but has yet to see a way to sell a house or condo for a profit in Japan.

-catone
-open to enlightenment

[Greji]

but has yet to see a way to sell a house or condo for a profit in Japan.

-catone
-open to enlightenment

Use Aneha as your architect....

[Mulboyne]

If you only based your judgements on 15 years of a trend then you would have been a rabid buyer of real estate in Japan in 1990, especially off-plan mansions, which wouldn't have been wise. And don't forget that as far as judging whether an asset is a good investment or not, some investors prefer income over capital gain which has been available in Tokyo at least for the last 7 or eight years.

Negative equity has been a feature of the post-bubble years but even then it hasn't been inevitable. It has been possible to buy land with a structure written down to zero which you nevertheless decide to live in. Some people have been astute enough to buy at auction and flip the property. No negative equity there. More commonly, though, this kind of purchase involves remodelling which does add to the total cost but is usually undertaken in order to earn a rent on the property. Most individual investors in real estate stick simply to trading in land rather than the structures which is more the province of the professional developers.

I have no idea on the likely future trend in land prices but I wouldn't have minded making 30% in Omotesando last year as one residential REIT was able to do. Certainly, as you say, if you buy a new mansion now and try to flip it you'll catch a cold but that is more to do with the structure of the real estate market rather than the value of real estate itself.

[drpepper]

We bought the mansion we are living in now 5 years ago and we are constantly being asked if we want to sell, the place would go for the same as for what we paid for it, essentially giving us 5 years of rent free living. While not a great profit by any means I am pretty satisfied that our place has not depreciated in the last 5 years.

[Catoneinutica]

If you only based your judgements on 15 years of a trend then you would have been a rabid buyer of real estate in Japan in 1990, especially off-plan mansions, which wouldn't have been wise. And don't forget that as far as judging whether an asset is a good investment or not, some investors prefer income over capital gain which has been available in Tokyo at least for the last 7 or eight years.

Negative equity has been a feature of the post-bubble years but even then it hasn't been inevitable. It has been possible to buy land with a structure written down to zero which you nevertheless decide to live in. Some people have been astute enough to buy at auction and flip the property. No negative equity there. More commonly, though, this kind of purchase involves remodelling which does add to the total cost but is usually undertaken in order to earn a rent on the property. Most individual investors in real estate stick simply to trading in land rather than the structures which is more the province of the professional developers.

I have no idea on the likely future trend in land prices but I wouldn't have minded making 30% in Omotesando last year as one residential REIT was able to do. Certainly, as you say, if you buy a new mansion now and try to flip it you'll catch a cold but that is more to do with the structure of the real estate market rather than the value of real estate itself.

Thank you for the clarification. Taro and Dr. Pepper seem to have done well with their mansions, and I'm happy for them, but their experiences seem to be exceptional - by which I mean (again I must rely on anecdotal evidence) no one I've talked to here in Chiba has enjoyed any appreciation in the values of their mansions or houses. Perhaps it's a function of supply elasticity - in (apparent) boom times such as these, developers slap together cardboard-and-concrete mansions faster than any existing building can appreciate in value, and in a quasi-industrial prefecture like Chiba, there's always a decrepit old factory or warehouse that can be knocked down to make room for one. There's a plentiful supply of fallow land that can be teased out in a strong market, unlike in, say, Den-en-chofu.

So the old dictum holds: location, location, location. What I'm saying is that it seems that Japanese treat homes as consumption goods, just like cars or washing machines - they build them, use them up, and tear them down after thirty years. How can you re-sell a depreciating asset for a profit? It's like trying to sell a used car for more than you paid new.

Again, you have to rely on land prices. And Japan's land market is notoriously inelastic. Moreover, I can't see a long-term appreciating trend a la pre-1990 with Japan's population shrinking.

Plus, as I understand it, there are punitive taxes on short-term real estate gains, designed to discourage "speculation," so even if you get lucky, like Taro, could you actually sell the place and hold on to any gain after taxes?

[Mulboyne]

...no one I've talked to here in Chiba has enjoyed any appreciation in the values of their mansions or houses....So the old dictum holds: location, location, location...

That's undoubtedly true. Whatever strength the real estate market has seen has largely been confined to central Tokyo, Nagoya and Osaka. In Chiba, I would imagine the performance depends when your friends and acquaintances bought as well as where.

One of the oddities of the mansion market is the large "bid-offer spread" which is a function of an illiquid market with imperfect information. You might have bought an apartment for 80 million a couple a years ago but found that if you asked around a few weeks later that a selling price was around 65 million. But is that a real price and does it say anything about value which is a different concept? If a buyer was looking to acquire that apartment, what's the chance that he could complete a transaction at that lower price? Often the asking price is back up at 80 million. In that instance, the buyer would likely plump for a new apartment instead and there has been sufficient supply of new developments to meet that demand.

The resale market for apartments less than five years old is not very liquid so there isn't a smooth trend in transaction prices. Some deals that go through are often when a seller is in distress so that is usually at a knockdown price. Does that price represent the real value of the asset? I think what you have discovered is that the structure of the market is not conducive to flipping. That's not much different to a locked-in savings investment where the early surrender value is often well below the real value of the assets.

That isn't always true of the market though. During the bubble, there was significant excess demand for mansion properties which enabled buyers to sell their property before construction had even finished - in effect they were trading apartment futures. We are nowhere near that state of affairs but I don't think Taro or drpepper have been unusually lucky with their purchases; a large number of recent buyers consider they have got good value from buying when they judge it from an imputed rent calculation rather than a potentially unreliable resale price indication. It depends what you are looking for, of course. And on earthquakes, I suppose.

[drpepper]

Well your analogy to cars is not that far off but there are throw away cars and then there are cars that will hold their value better. In Japan I suppose cars will hold less of a value than elsewhere but if you are buying a home and thinking that you will sell it at some point in the future then you need to think about the location and future resale possiblities. I bought in a good area in downtown Osaka and new the area was going to be further developed and a new station (the 6th in walking distance from my place) was on its way. The location is what keeps it's value high and allows me the option of selling it off with either no loss or a slight profit or rent it out and make money. I bought the place 5 years ago and the rates then and now on loans are good (recently refinanced to a fixed-variable at .9%). If the rates jump I'll sell the place, if not then will rent it out once I get my big business running and can go back and live in sunny So-Cal again

[Buraku]

Only downtown Tokyo...
Japanese crappiest-in-the-developed-would housing is dropping like a rock out here in shit-burbia. That 10 million yen ($89,742 U.S. dollars) Lion's mansion (2LDK 60 sqm) 28 minutes from Shibuya is still for sale after 2 months.

They really are living in over priced dog-kennels, it's not something unque to Japan though, to live your life in expensive slums is kind of a trend in Asian nations

[drpepper]

They really are living in over priced dog-kennels, it's not something unque to Japan though, to live your life in expensive slums is kind of a trend in Asian nations

90K for a place?? Hardly call that expensive especially something that is less than 30 min to Tokyo... Seems more like a case of a properly priced dog-kennel to me.

[Buraku]

Oh yeah, almost forgot, thanks for the advice about not buying a house here. I am now fully convinced to never, ever do that.

and the gran'-child of red riding hood declares 'oh, tanuki what big nuts you have'

http://www.stinky.com/anabu/

[steeny]

I suppose opinions on buying a house are changing now that the market seems to be a' risin'. http://www.foreclosedjapan.com is dirt cheap.

[Mulboyne]

FT: Alarm raised over Japan real estate

The head of Japan's second biggest housebuilder on Wednesday warned Japanese property prices were a bubble set to burst, fuelling concerns that real estate prices have reached unsustainable levels just a few years into a recovery from a prolonged slump. "The property market has become dangerous and I wouldn't be surprised if the real estate bubble goes bust," Takeo Higuchi, chairman of Daiwa House, told Bloomberg. Mr Higuchi's remarks come as two of the world's hitherto most buoyant property markets - the US and the UK - face widening problems, raising fears of a global property slump...more...

[kusai Jijii]

I think it also helpful to think about where in Japan we are talking about. Although the future of many places in Japan dont look that promising as far as property investment is concerned, IMO,there are some growth areas with potential.

[ttjereth]

I reallllly want my own house

[Tsuru]

global property slump

Bring it on I say. Fuck price-hiking real estate sales assholes worldwide. I hope they all lose their fucking jobs for squeezing young families for all they're worth.

The moment prices in this country start tumbling is the moment you will see me walking to the bank laughing my ass off.

[james]

Bring it on I say. Fuck price-hiking real estate sales assholes worldwide. I hope they all lose their fucking jobs for squeezing young families for all they're worth.

The moment prices in this country start tumbling is the moment you will see me walking to the bank laughing my ass off.

i have no use for real-estate agents and i think their role has become rather ancillary if not completely outmoded in this day and age. why work through agents when buyers and sellers can deal direct and cut out those sycophants? i'm rather ignorant on the subject, but is there any real function that a real-estate can perform that buyers and sellers couldn't take care of themselves?

just out of curiosity, where do you mean when you say "this country"? are you in canada now?

[sublight]

Some areas that were previously considered lower-class are going through a boom. Minami Senju just finished a complete neighborhood renewal project and has at least five new condo complexes going up. We were lucky enough to find this neighborhood four years ago (the renewal was still only a quarter done) and bought a place in one of the first private mansions to go up. A couple of months ago we saw a real estate flyer advertising the apartment right below ours (so same area and layout). The asking price was about 20% more than what we'd paid. The new condos going up seem about the same quality as ours but are 50% more.

[kusai Jijii]

Some areas that were previously considered lower-class are going through a boom. Minami Senju just finished a complete neighborhood renewal project and has at least five new condo complexes going up. We were lucky enough to find this neighborhood four years ago (the renewal was still only a quarter done) and bought a place in one of the first private mansions to go up. A couple of months ago we saw a real estate flyer advertising the apartment right below ours (so same area and layout). The asking price was about 20% more than what we'd paid. The new condos going up seem about the same quality as ours but are 50% more.

Now datz what I'm talkin' 'bout! There are some (though limited) growth areas where bargains can be had.

[Tsuru]

i have no use for real-estate agents and i think their role has become rather ancillary if not completely outmoded in this day and age. why work through agents when buyers and sellers can deal direct and cut out those sycophants? i'm rather ignorant on the subject, but is there any real function that a real-estate can perform that buyers and sellers couldn't take care of themselves?

just out of curiosity, where do you mean when you say "this country"? are you in canada now?

We're in a medium-sized city in the western part of Holland. Where an 800sqft apartment costs $350000.

Right now we are on the verge of buying our first home, but I am waiting for the two tidal waves of falling prices bound for this country. One is caused by the imploding real-estate market in the US, but specifically for Holland we also got a system of subsidies used by home-owners to pay more for a house than it's actually worth. Once they finally get rid of them, that should cut prices by 30% right there, on top of the collapse already caused by this global slump. Once that time is here I intend to buy a house or a large apartment and hang on to it even after we move to Canada, even in an environment of rising interest. Because of course prices will soar again right after the collapse.

It's all a bit sketchy right now, but one thing is for sure: people who buy a house right now in this part of the world are idiots.

[RAMOS]

Some areas that were previously considered lower-class are going through a boom. Minami Senju just finished a complete neighborhood renewal project and has at least five new condo complexes going up. We were lucky enough to find this neighborhood four years ago (the renewal was still only a quarter done) and bought a place in one of the first private mansions to go up. A couple of months ago we saw a real estate flyer advertising the apartment right below ours (so same area and layout). The asking price was about 20% more than what we'd paid. The new condos going up seem about the same quality as ours but are 50% more.

Minami Senju??? Good on you. Me loves shita-machi!!! Yup, many are the times I've stayed at one of the many 2500 yen joints in the area, greeted by homeless, drunk, ojiisans!!! Unfortunately, tyhe character of the place seems to be changing. Yikes, it's getting cleaner by the day... *Sigh* But seriously, I love that area, but it IS being "gentrified" at a an awfully rapid pace. Good for you, I reckon, if less charming for those of us who only pass through...