To buy or not to buy, that is my question.

[RetireJapan]

Well, we can quickly run the OP’s numbers, throw in a couple assumptions, and do a simple comparison:

After 10 years, if you own, you have the option to keep your property and rent it out to produce income. You may come to consider the rental cash flow generated as more valuable in the long term than selling. If you rent, obviously that option is not there.

Nice numbers! I think from a financial point of view neither buying nor renting is particularly compelling here. Important to note that residential mortgages don't allow you to rent the property out -you would have to remortgage or pay it off in full to do so.

[SARS]

you would have to remortgage or pay it off in full to do so.

I've seen this on a few posts on this forum and want to point out it's not entirely accurate. I know of at least one case, a friend, who left Japan and got permission by Mizuho to rent out his place under the same residential mortgage.

Obviously not guaranteed, but worth noting that even Japan banks have some flexibility. We also have something similar in UK, it's often called "consent to lease".

[RetireJapan]

you would have to remortgage or pay it off in full to do so.

I've seen this on a few posts on this forum and want to point out it's not entirely accurate. I know of at least one case, a friend, who left Japan and got permission by Mizuho to rent out his place under the same residential mortgage.

Obviously not guaranteed, but worth noting that even Japan banks have some flexibility. We also have something similar in UK, it's often called "consent to lease".

Good point! Of course if the bank agrees, they can release you from that clause of the contract. But they don't have to, so best not to make plans before talking to them

[Tomthumb16]

The apartment was a short walk for a popular station and on the top floor.
Even then I think they only got what they paid for it after about 10? years.
And buying those kind of places, new or used, is obviously highly competitive.
Yeah fair point. I do not know anyone here either who buys or sells. It buy and live in it until I pop my clogs.

[Tomthumb16]

Well, we can quickly run the OP’s numbers, throw in a couple assumptions, and do a simple comparison:

Buying: (house w/property)
50m + 10% (5m) for fees/curtains/etc. = 55m
Let’s assume 20万/yr for taxes, and 20万/yr for maintenance & insurance, x 10yrs = 4m
Total buying cost = 59m

Renting:
18万/mth x 120mths (10yrs) = 21.6m
Let’s assume this 18万 includes everything (管理費、修繕積立金、parking)
Total renting cost = 21.6m

Therefore, the question is: how much does he need to recoup on his purchase to do better than negative 21.6m?

The answer: The property price can decline to 40m (20%) before renting becomes the better deal. (i.e. -59m + 40m – (40m*6%) = negative 21.4m after 10years. (the 6% is assumed selling costs)

A 20% property value decline over 10 years is certainly more than possible, actually, it's probably something that is close to average, anecdotally speaking. But, you can mitigate this by selecting a good property... and all the factors that make real estate desirable in any country also apply here (location, building quality, neighbourhood amenities, location, the view, safety … did I mention location?) Conversely, buy an overpriced (i.e. brand new) place that has not yet depreciated, on the ground floor, up 20min up a hill from a minor station that's in semi-rural Saitama, with no stores about ... and you can probably expect trouble recouping enough money when selling.

Finally two more considerations:
- Cash flow: A down payment of some sort will likely be required at the time of purchasing, but depending on how you structure your mortgage, your monthly payments can be cheaper than rent, freeing up cash.
- Asset ownership: After 10 years, if you own, you have the option to keep your property and rent it out to produce income. You may come to consider the rental cash flow generated as more valuable in the long term than selling. If you rent, obviously that option is not there.

Thank You so much for running numbers for me. I`m still undecided to be honest. Numbers do not lie which you have helped me greatly in getting a better understanding of. I owe you a beer or two.

[beanhead]

Good point! Of course if the bank agrees, they can release you from that clause of the contract. But they don't have to, so best not to make plans before talking to them

But good luck persuading the bank to allow you to do this while you are not even going to be living in the country!
Perhaps with a Japanese family member still here and willing to be guarantor it might work...

[stump117]

Well, we can quickly run the OP’s numbers, throw in a couple assumptions, and do a simple comparison:

You actually got me curious on rent trends, don't they ever increase? I felt it was a tad too conservative in your calculation to assume the rent would stay flat at 1.8man for 10 years, but I haven't been in Japan long enough to really believe in this hunch.

[RetireJapan]

You actually got me curious on rent trends, don't they ever increase? I felt it was a tad too conservative in your calculation to assume the rent would stay flat at 1.8man for 10 years, but I haven't been in Japan long enough to really believe in this hunch.

Ha, ha, rents would probably go down as the building gets older/becomes less attractive (unless you renovated periodically)

[jcc]

You actually got me curious on rent trends, don't they ever increase? I felt it was a tad too conservative in your calculation to assume the rent would stay flat at 1.8man for 10 years, but I haven't been in Japan long enough to really believe in this hunch.

Ha, ha, rents would probably go down as the building gets older/becomes less attractive (unless you renovated periodically)

My place hasn't changed at all but we had an unwelcome bump of about 3% rent raise with our last renewal.

I think it depends where. This whole area has just seen prices keep going up. It felt overpriced a few years ago, now I just can't see myself buying here(east part of tokyo but not too far from yamanote) despite really liking my neighborhood. On the other hand, I also can't see the prices continuing to go up at this rate. I'm just hoping that my company decides to go for "primarily remote work" and then I'll move out to the countryside I think...