Buying/building house (greater Tokyo area) - Where to start?

[Sterk]

Hi folks,

I am probably going to cross-post this elsewhere online, but TL;DR I am looking into buying/building a house and am a bit lost as to what is the right “playbook” to follow, so I am reaching out to the wisdom of those who already went through the process.

My situation: M39 with PR, living in the Tokyo area. Been working as 正社員 for the same company for 4 years, income in the 15-20M JPY range. Max budget around 1億円. I would move in with my partner. We are not married (yet), I would be the one taking mortgage and ownership and am making calculations based on my income alone.

What we want: a place that would still serve us well in the case we end up having a kid in the next few years. A centrally located small apartment would be a no-go but a daily commute of >1h would be equally tough, so a compromise has to be found. Concretely, 80 sqm and 3DK/3LDK layout is the minimum I am willing to consider. Workplace is 10 min away from Shibuya, even if that were to change in the future it is unlikely I would stray far away from the usual places where tech/IT companies are located. Completely fine living outside the 23-ku, however being well connected to central Tokyo is a necessity. Yes, that means a price premium and trust me I would love to be able to live in a cheaper town, but a very long commute would be a huge downgrade in quality of life.

In principle I have no hard preference on new vs used, but proper insulation and state of the art earthquake resistance are factors I am not very willing to compromise on for our “forever” home, and they do not seem easy to find on the secondhand market. For this reason, I am now entertaining going with one of the large builders whose homes incorporate these features by design. Heard good things about Ichijo’s smart homes from various people as well as from some posts here, did some online searches and I liked what I saw. But I admit I have little clue where to start the process from and feel a bit lost.

• Any firsthand recommendation on how to make a first contact with an agent or builder to explain what I am searching for?
• Is this a feasible idea, or would it be very difficult to execute (e.g. too costly, too difficult to find land) considering my proximity to Tokyo?
• Supposing I find a suitable place, would they also help me get in touch with banks for the mortgage, or will I be on my own there?
• How much communication with your agent is required and how often? My Japanese is serviceable, but might struggle if complex negotiations are required (my partner can help but ultimately I am the one doing the purchase).

I know I am putting together a lot of discussion points in a fairly general way, so happy to articulate better where necessary!

[sutebayashi]

I built a new home within 30 minutes by foot + train (or bicycle if I believe google) of Shibuya about 10 years ago. My salary wasn’t as high as yours (and still isn’t lol) but in the end I bought land and with the cost of the new house it came to around 120 million, so if anything your budget seems kind of low to me - at the outset it seems expensive but 10 years down the track the mortgage is 2/3d’s paid and no regrets. But I don’t know what expensive hobbies you might be spending your income on (my household is pretty frugal in terms of regular outlays).

The house is 120m2 in two floors, car port, a bit of space for a lawn.

Land prices and building costs should have all increased somewhat since then, so I suppose I would have to pay 1.3-1.4 if I were purchasing the same again these days…

This was after being married and having our first kid.

We had looked around at used homes, and also visited the “Hamadayama Housing Park” a few times to get the rundown from various house builders there (it’s on the Inokashira line out of Shibuya), and its there that we decided we wanted to build from scratch.

The tricky part next was finding a piece of land that we liked… this is so down to luck. My partner did lots of talking with real estate agents and I am not sure how above board everything was at the real estate agent’s end, but eventually a large enough (too large even) piece of land with an old house on it came up and we made a quick decision to buy it before we lost it, and fortunately eventually went through smoothly after that.

So to your points:

- in our case we talked with the builder at Hamadayama Housing Park”, and they led us through things from there. (I can’t remember if Ichinojo is at Hamadayama Housing Park but they may be.) Our builder introduced some land based on their own contacts, but that all seems an bit dodgy to me - probably seek land yourself via a real estate agent yourself is better, rather than entrusting both the building of a home and the land stuff to the same company - the builder wants to get the deal done asap to make money, whereas you are trying to find the place that you will spend the majority of your life in so there is a conflict of interest there to be aware of. Take your time with this! The real estate agents themselves are trying to link buyers and sellers on their own books to try to take in the commission from both sides of the sale, so they have their own motives too - they want to maximize their profits not link you up with the land that you want.
(My partner actually complained to the builder about some of the behavior she felt concerned about and then from thereafter the manager took over our case and he kept us happy.)

- your budget is smaller than I paid but your minimum requirements on home size is smaller, so it doesn’t seem infeasible to me. Your salary suggests you go pay more though if you need to. Also in my case we ended up with three kids rather than the two I planned, so I’d say it might be a good idea to start looking for purchase opportunities but don’t rush it since you aren’t married and don’t have a first kid yet. But if a perfect place or spot of land does pop up, you want to be ready for it. We were rather picky about the type of land we wanted so it only happened after a place came on the market (and we decided to buy it before it had even been properly advertised…)

- the builders can probably help direct you to places to get a mortgage - ours did and to keep things simple we took the initial mortgage out with a lender closely affiliated with the builder. But this was more costly. A year later I refinanced the initial mortgage at much lower rate with SBI Sumishin net bank. If you can stand the hassle of dealing with multiple things at once then getting a mortgage from a cheap provider from the outset is financially best, but the builder may offer something more convenient as it was in my case. They did recommend I get PR so as to be able to get a better mortgage loan. So I did. (Deep Blue has commented on some longer term pitfalls of PR elsewhere)

- my Japanese is pretty good but my Japanese native partner did most of the talking anyway, especially during the dodgy dealings related to finding suitable land.

[sutebayashi]

I see Ichijo is there:
https://housing-messe-hamadayama.com/ichijo/

[AreTheyTheLemmings?]

I am not sure how above board everything was at the real estate agent’s end [...] the dodgy dealings related to finding suitable land.

This might be somewhat timely for the Lemmings household. If you don't mind, could you elaborate on why it was (or why you felt it was) dodgy?

[sutebayashi]

I am not sure how above board everything was at the real estate agent’s end [...] the dodgy dealings related to finding suitable land.

This might be somewhat timely for the Lemmings household. If you don't mind, could you elaborate on why it was (or why you felt it was) dodgy?

What I recall about it was that the real estate agents can deal on both the seller’s side and the buyer’s side, and the best situation for them is to match up the seller and buyer directly without matching up via another real estate agency acting on behalf of the other party. Double the commission for them in this way. (囲い込み seems to be the practice I am referring to)

There was a house my wife was keen on buying (me not so much but besides the point), and we went to see it and talked to the seller.

Things seemed like they were going good, but then it fell through and what I heard was that it involved the real estate agent of the seller telling the seller that we were planning to bulldoze it, or something like that which we did not wish to tell the seller (who was keen to find a buyer who would not bulldoze it).

I think the real reason it blew up was because of this issue of the real estate agent on one side wanting to make a deal where they could get both sides of the commission - I am not sure if it was our agent or the other side - but actually after this deal fell through it was then that our agent hurriedly put what is now our land in front of us, and we bought it. There was something fishy about it all, and perhaps it was our agent that was doing something dodgy here.

The other thing was that the land we bought was out in front of us for price X, but at that stage the land hadn’t been measured up or anything properly - so it was like our agent showed it to us to get us to forget about that deal that fell through. After the land had been measured up it turned out to be a lot larger than originally thought, so we had to agree on a new price with the seller. Here again the real estate agent was probably at fault for not following the correct order of things, but nonetheless both buyer and seller could agree so we held our nose and completed the purchase.

There are I think some compliance and ethics rules around all of this, and it might be interesting to ask your potential real estate agents about this before you start to do business with them!

[Sterk]

Hey, thanks for the detailed reply!

I built a new home within 30 minutes by foot + train (or bicycle if I believe google) of Shibuya about 10 years ago. My salary wasn’t as high as yours (and still isn’t lol) but in the end I bought land and with the cost of the new house it came to around 120 million, so if anything your budget seems kind of low to me - at the outset it seems expensive but 10 years down the track the mortgage is 2/3d’s paid and no regrets. But I don’t know what expensive hobbies you might be spending your income on (my household is pretty frugal in terms of regular outlays).

The house is 120m2 in two floors, car port, a bit of space for a lawn.

Neither of us engage in super expensive hobbies, only real money drain these days is international travel (family lives in EU so holidays are expensive, but spending time with them is worth the money). As for budget vs salary: as you say I might be able to go slightly higher but a part of my income is tied to stock bonuses and I can't control how things hold up in the next years, so I try to stay anchored to my base pay (~15M).

- in our case we talked with the builder at Hamadayama Housing Park”, and they led us through things from there. (I can’t remember if Ichinojo is at Hamadayama Housing Park but they may be.) Our builder introduced some land based on their own contacts, but that all seems an bit dodgy to me - probably seek land yourself via a real estate agent yourself is better, rather than entrusting both the building of a home and the land stuff to the same company.

Makes sense. Will look into the housing park! Any recommendations for a good agent to search for the land?

Also in my case we ended up with three kids rather than the two I planned, so I’d say it might be a good idea to start looking for purchase opportunities but don’t rush it since you aren’t married and don’t have a first kid yet. But if a perfect place or spot of land does pop up, you want to be ready for it.

To be honest, I am ideally shooting for something around 100 sqm. The minimum I quoted is as far as I am willing to compromise in case, say, we found the perfect location. Completely agree on wanting to be covered in case the family ends up being +1 larger than planned. I do not plan to rush this, simply want to start my search so that I am ready to spring into action when the right opportunity comes up .

- the builders can probably help direct you to places to get a mortgage - ours did and to keep things simple we took the initial mortgage out with a lender closely affiliated with the builder. But this was more costly. A year later I refinanced the initial mortgage at much lower rate with SBI Sumishin net bank.

In my case, I do have PR so not concerned about getting an unfavorable rate but at the same time not an expert on how to shop around for a better one. Did refinancing later require a lot of additional work (searching, screening, paperwork...)? Were there any strings attached?

[AreTheyTheLemmings?]

I am not sure how above board everything was at the real estate agent’s end [...] the dodgy dealings related to finding suitable land.

This might be somewhat timely for the Lemmings household. If you don't mind, could you elaborate on why it was (or why you felt it was) dodgy?

What I recall about it was [...]

Thank you!

[sutebayashi]

Hey, thanks for the detailed reply!

My pleasure, it was nice to jog my memory!

so I try to stay anchored to my base pay (~15M).

I remember the housing builders hearing what sort of upfront payment we were willing to make, and being quite eager to get our business, so with that sort of info I think you’ll sound like an attractive customer to them.
(It’s possible they were just giving us an oseji)

Makes sense. Will look into the housing park! Any recommendations for a good agent to search for the land?

The housing park is really interesting to see what the makers are selling. The model homes are all fantastic and unrealistic for living in Tokyo but it’s nice to dream.

I can’t remember how we came across our ultimate real estate agent, but I think the way to go is to choose one in the vicinity of the area(s) you would like to find land (nearest train station), because they are most likely to have the information about potential sellers (who live in the neighborhood and drop in to the closest place themselves), before the info is widely disseminated amongst various agents and the land is thus snapped up. (Even if it is this nasty 囲い込み practice, in the end who cares if you find what you are looking for)

Based on my experience I would avoid going through the home builder for this, but of course you could let them try! Just don’t let them try to talk you into buying the first or second lot of land they show you.

In my case, I do have PR so not concerned about getting an unfavorable rate but at the same time not an expert on how to shop around for a better one. Did refinancing later require a lot of additional work (searching, screening, paperwork...)? Were there any strings attached?

I don’t remember if I already had a bank account with Sumishin SBI, but I saw via some website that their rates were much better than I was paying. Essentially being a net bank the application was to be done online, but at the time there was this “money plaza” shop in Shinjuku where you could go to talk to a person and get them to help (this may have closed down now), so being lazy I went that route, and can’t recall it being very difficult since the Japanese person guided me through it. I might have visited the Money Plaza twice, maybe three times, as well as the outfit I got the original mortgage with when paying off that mortgage.

So not at lot of extra work, but in terms of cost, there was an initial fee of something like 2 million yen to refinance - this sounds like a lot but over the life of the mortgage the lower rate was going to save me 10 million yen so it seemed like a good deal. (I have a fixed rate mortgage to avoid interest rate risk - I refinanced just after Kuroda-Sam’s negative interest rates started I think so that had also brought rates down)
I was almost halving my mortgage interest rate, so I didn’t bother to shop around to get the very best deal, but I think Sumishin SBI was probably about the lowest available at that time.
That said, if you can get a provisional agreement with an attractive lender ahead of time, you could avoid this kind of 2 million refinancing fee which I suppose is partly what I paid for being lazy in the first place. That’s not how I did it, but I gather you can get a potential lender lined up ahead of time, so it’s probably something to look at first.

[Sterk]

Based on my experience I would avoid going through the home builder for this, but of course you could let them try! Just don’t let them try to talk you into buying the first or second lot of land they show you.

Yep, makes sense. Will stress again here that I am i no hurry and the reason I am starting a search early is precisely because I do not intend to be pressured into making a decision.

That said, if you can get a provisional agreement with an attractive lender ahead of time, you could avoid this kind of 2 million refinancing fee which I suppose is partly what I paid for being lazy in the first place. That’s not how I did it, but I gather you can get a potential lender lined up ahead of time, so it’s probably something to look at first.

Provisional agreement --> You mean a pre-approval from a bank, I assume? That's something I have seen a few times as a recommendation. What are the requirements? Can I just walk in and have a quote for how much they can lend based on an assessment, or do I need to have a general idea of what I am going to buy? Any idea how long an agreement would be valid for, as in does that trigger a time window for searching?

[zeroshiki]

It seems like most people are looking north (Saitama) and east (Chiba) nowadays since west/south (Yokohama) is tapped out. Less than 1 hour to Shibuya for less than 100M seems really unrealistic to be honest. Maybe somewhere towards the Hachioji area would be possible for a house?
A mansion for 100M and 80m2 would bring you to the outskirts of Tokyo already and I assume a house would be similar. I know someone who built a house in Nagareyama Ootaka for around 150M and 100m2 but that was 8 years ago. I can't imagine how a new house there would cost now.