There is no spoon
We looked at housing options in Japan last month: broadly speaking you can choose a flat or a house and both have their advantages and disadvantages.
Today we're going to look at whether it is better to buy or to rent, and the kinds of things you might want to think about when deciding. We're not going to talk about buying real estate to rent out to other people today.
Let's address the main thing: buildings in Japan depreciate. Unlike most western housing markets, the price of a new house or condo will probably go down over time, often reaching zero or even minus numbers (the cost to demolish the building is deducted from the value of the land).
Land prices may increase, hold steady, or decrease, depending on local conditions.
This make buying a home in Japan less attractive than in other markets, where you might expect house prices to at least go up with inflation, if not more.
As in other countries, transaction costs to buy are high in Japan (our lender budgeted around 10% of the purchase price for taxes, fees, compulsory insurance, etc.) which further reduces the attractiveness, particularly in the short-term.
However, mortgages are often cheaper than the rent on a similar property (sometimes quite a bit cheaper). It is important to remember to include the cost of property taxes, insurance, fees (for manshons), and maintenance when thinking about the cost of buying, but even after doing so you may find it is cheaper to buy than to rent, provided you stay there forever.
The transaction costs and depreciation will eat you alive if you try to buy and sell real estate over the short-term (less than 10-15 years).
If you buy a new house you will be able to design it according to your needs and wishes (although just how much time this takes should not be underestimated). New houses also depreciate the fastest, and the more you customize it the less attractive it may be to a buyer.
Second-hand houses or condos can often be a good deal, as you benefit from the depreciation the first owner has paid for. Buying them means you get to renovate or decorate them as you like.
Also, by buying you escape from the rental market in Japan.
Renting a home in Japan can be stressful too (maybe not as stressful as buying, but you tend to only buy once, whereas you may find yourself renting several times).
Rents tend to be higher than mortgages, as they have to cover the landlord's costs and profit.
It can be difficult to rent, particularly if you want to rent a nicer property. I found it easy to rent apato or manshons in Sendai, but when we tried to rent a house we had a 90% rejection rate, for reasons. There are also a lot fewer houses for rent here than there are flats (this may be different in other areas).
Then there are the fees. Shikikin (deposit), reikin (thank you money???), estate agent fees, compulsory insurance, renewal fees, etc. can easily add up to four to six months rent even before you move in.
* I have heard good things about UR, both in terms of fewer fees and reasons, so they might be an option to consider if you are looking to rent a manshon.
So is it better to rent or buy in Japan? They can both be expensive and stressful.
Generally speaking, if you will be living somewhere for a long time (15+ years?) you may find the numbers favour buying. If you know you'll probably only be there for a few years, you might be better off renting.
Other than that, it all boils down to lots of emotional and situational differences. Everyone is going to have different priorities. Just do yourself a favour and make sure you understand the numbers before you make a decision. All the numbers.
Also think about some extreme situations, like 'what happens if we decide to move in a few years anyway' or 'what happens if there is a serious natural disaster'? It's always good to be aware of worst-case scenarios.
Finally, it can be really expensive to get out of a place you bought or rented, so do your homework before you move in: check out the local area in detail, try to meet or observe the neighbours, see what the noise levels are like at all times of the day and night.
Crazy neighbours are no fun, as my family found out when we had to call the police five times on the weird guy across the way who took a hostile interest in us.
How about you? How did you decide on your current dwelling? Anything we missed in the article?