Buying apartment on leased land

[Sarutaro]

Me, the missus and the neko are looking to buy an apartment in central Tokyo. Now, the one we looked at today was on leased land. Does anyone know what this means in terms of risk compared to a regular one? I am told that it could meen difficulty getting a housing loan, for example.

Thanks in advance!

[GomiGirl]

No advice other than to do your sums of purchasing over renting for x years.

The property will not be worth anything after 20 years so if the cost of the mortgage (principle plus interest) is still less than the amount you will have paid in rent then do it. Also factor in maintenance costs, repairs etc.

[Sarutaro]

No advice other than to do your sums of purchasing over renting for x years.

The property will not be worth anything after 20 years so if the cost of the mortgage (principle plus interest) is still less than the amount you will have paid in rent then do it. Also factor in maintenance costs, repairs etc.

Thank you for your advice. It is indeed important to do calculations. Real estate agents try to give as little info as possible it seems. They are, for example, always unable to give me the tax property value.

I have also heard the "it will be worth 0 yen after 20 years" argument before, but I don't really believe it. There are plenty of 20-30 year-old apartments that fetch a pretty high price.

[FG Lurker]

How old is the apartment? How long is the land-lease for? How many years are left in the current lease? What are the terms of the lease? Also, who holds the lease?

The answers to all those questions are very important in order to come to a decision about value. Personally though I would not buy something on top of leased land in an urban area today. Urban land prices are finally starting to show some signs of recovery, and any future renewal of the lease is likely to be at much higher rates than it currently is. This is of course somewhat determined by the terms of the lease...which is why knowing the terms is very important.

There will be lots of deals out there that do not involve leased land. I suggest avoiding the potential problems and just going for something that does not involve a lease.

I have also heard the "it will be worth 0 yen after 20 years" argument before, but I don't really believe it. There are plenty of 20-30 year-old apartments that fetch a pretty high price.

The catch is that most of those 20-30 year old apartments are selling for far less than they cost 20 to 30 years ago. Unless the apartment has something of value (large size, prime location, valuable (non-leased!) land, etc) they drop in value.

Often places drop so much that it is cheaper to just pay rent than it is to live there for less than 10 years or so, sometimes less than 20 years. The apartment I just moved out of is a good example of that... They sold new for about 2800man 15 years ago. Now they are selling for about 1800man. So anyone who bought one has not only paid their mortgage (and of course interest) for that time, but they have lost 55,000 a month or so in value. That get's expensive.

Good luck, keep looking. There are good deals to be found.

[Greji]

Me, the missus and the neko are looking to buy an apartment in central Tokyo. Now, the one we looked at today was on leased land. -snip-

I'm not sure about mansions, but in the case of houses it can get tricky. My sister-in-law bought a house, actually built it, on leased land. In this case it was their lease and they leased it for 20 years, which was as long as the Oyasan would give. At the end of that time. He refused to re-new the land lease, which left them with taking their house (?) and leaving. During the negotiations the Oyasan died suddenly and his son opted to re-new the lease for them. So everyone was happy (accept the original Oyasan).

It was a very popular way to built houses at one time, if one did not have the financing for both house and land, but in turn, created myriad lease problems. With an apartment (mansion), at a minimum, you would have to insure that there was language in the contract that in the event of a change or termination of the lease or leasor, you were provided with the proper protection.