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View Full Version : Do you own your house/apartment in Japan ?



Maciamo
Mar 19, 2010, 16:31
There many long-term or permanent residents on the forum. I wondered how many took the step of investing in real estate property, and why, as opposed to the alternative of renting. I personally have considered the possibility but found it too risky because of earthquakes.

On the other hand, when I discussed the issue with Japanese friends they raised the noteworthy point that to invest cleverly is to buy enough land compared to the house price to offset the loss of the house in itself in case of destruction. In central Tokyo, where real estate prices are so high, the value of the construction is relatively low in proportion to the land, which actually makes it a good investment.

Imagine that a standard house cost 10 million yen to build anywhere in Japan (hypothetical figure). If land has little or no value, like in some parts of Tohoku where government gives building lots for free to avoid rural exodus, if the house is razed by a quake, the total loss is 10 million yen - 100% of the property value. If you buy expensive land in central Tokyo that cost you 40 million yen just for a small patch that surrounds your house, that will cost you 50 million at the start, but you will have 40 million worth left if the house disappears. The loss is only of 20%.

This is in part why the Japanese authorities have allowed real estate prices to rise so high in big cities, and incited citizens to gather in such huge agglomerations to keep prices artificially high. A strongly concentrated population actually makes economic sense in an earthquake-prone country (in spite of all the other disadvantages with regard to safety).