Deciding to Continue Renting Indefinitely?

[EmaxisSlim Cultist]

My wife and are living in an old 3lDK in Southern Tokyo that is heavily subsidized through my wife's work. It is very liveable, but very Showa and barebones. We are both now in our mid-30s with a toddler. The place is close to her work, and we have a great hoikuen and elementary school nearby. I am an adjunct so I work at different unis, all around Tokyo.

Whenever we discuss buying a home, we always go back to how much we save by staying in this older apartment. This has allowed us to really grow our taxable accounts (as well as ideco/Nisa/JNisa).

However, I am slightly worried if we wait until our 40`s, the mortgage situation might not be as favorable. I am also worried that there will be limited rental options later in life if we decided NEVER to purchase.

What other pitfalls do I need to consider?

I could see us in the apartment possibly until my son is junior high age (10 years or so). We will remain in Kanto until we retire

[Ori]

First of all, I wouldn't take elementary school and, especially, hoikuen into account. Ninka hoikuens are more or less same everywhere, so unless it's some special montessori-pontessori place which makes geniuses, I wouldn't worry about that much (what I would worry about, is how difficult it would be to get into hoikuen at your new place, though). Public elementary schools are also not that much different, I think. And it's only 3 years anyway.

As for you worry about unfavorable mortgage situation in future, you might be able to offset it to some extent by paying larger down payment, which you should be able to afford by then due to the low rent now.
You could also consider buying a property now and rent it out until you are ready to move. Loan interests for commercial properties are higher, but if you choose location wisely, you shouldn't loose any money.
And finally, I think it is also very important to think about commute time. Can you afford buying a place near your wife workplace? If not, is she ok with spending time commuting everyday? Or changing jobs? Or are there any prospects of remote work?

[Beaglehound]

My wife and are living in an old 3lDK in Southern Tokyo that is heavily subsidized through my wife's work. It is very liveable, but very Showa and barebones. We are both now in our mid-30s with a toddler. The place is close to her work, and we have a great hoikuen and elementary school nearby. I am an adjunct so I work at different unis, all around Tokyo.

Whenever we discuss buying a home, we always go back to how much we save by staying in this older apartment. This has allowed us to really grow our taxable accounts (as well as ideco/Nisa/JNisa).

However, I am slightly worried if we wait until our 40`s, the mortgage situation might not be as favorable. I am also worried that there will be limited rental options later in life if we decided NEVER to purchase.

What other pitfalls do I need to consider?

I could see us in the apartment possibly until my son is junior high age (10 years or so). We will remain in Kanto until we retire

Are you certain/likely to remain in Kanto after you retire as well? Savings/investments you are making now might leave you in a position to choose freely where to retire and have the resources to set yourself up nicely in a less expensive area.

[EmaxisSlim Cultist]

My wife and are living in an old 3lDK in Southern Tokyo that is heavily subsidized through my wife's work. It is very liveable, but very Showa and barebones. We are both now in our mid-30s with a toddler. The place is close to her work, and we have a great hoikuen and elementary school nearby. I am an adjunct so I work at different unis, all around Tokyo.

Whenever we discuss buying a home, we always go back to how much we save by staying in this older apartment. This has allowed us to really grow our taxable accounts (as well as ideco/Nisa/JNisa).

However, I am slightly worried if we wait until our 40`s, the mortgage situation might not be as favorable. I am also worried that there will be limited rental options later in life if we decided NEVER to purchase.

What other pitfalls do I need to consider?

I could see us in the apartment possibly until my son is junior high age (10 years or so). We will remain in Kanto until we retire

Are you certain/likely to remain in Kanto after you retire as well? Savings/investments you are making now might leave you in a position to choose freely where to retire and have the resources to set yourself up nicely in a less expensive area.

Impossible to say to be honest. I do not know what 60 will look like. Where are children will decide to settle, etc.

However, I am uncertain about the prospects of renting at that age. Even with a sizable nest egg.

It seems everyone ends up buying in Japan eventually?

[RetireJapan]

Once you know where you want to be, buying tends to be cheaper than renting, and higher quality.

But you really don't want to have to move. So best to rent until you are sure.

[Beaglehound]

My wife and are living in an old 3lDK in Southern Tokyo that is heavily subsidized through my wife's work. It is very liveable, but very Showa and barebones. We are both now in our mid-30s with a toddler. The place is close to her work, and we have a great hoikuen and elementary school nearby. I am an adjunct so I work at different unis, all around Tokyo.

Whenever we discuss buying a home, we always go back to how much we save by staying in this older apartment. This has allowed us to really grow our taxable accounts (as well as ideco/Nisa/JNisa).

However, I am slightly worried if we wait until our 40`s, the mortgage situation might not be as favorable. I am also worried that there will be limited rental options later in life if we decided NEVER to purchase.

What other pitfalls do I need to consider?

I could see us in the apartment possibly until my son is junior high age (10 years or so). We will remain in Kanto until we retire

Are you certain/likely to remain in Kanto after you retire as well? Savings/investments you are making now might leave you in a position to choose freely where to retire and have the resources to set yourself up nicely in a less expensive area.

Impossible to say to be honest. I do not know what 60 will look like. Where are children will decide to settle, etc.

However, I am uncertain about the prospects of renting at that age. Even with a sizable nest egg.

It seems everyone ends up buying in Japan eventually?

Yeah, I meant you could use said nest egg to buy.

[beanhead]

If you have subsidized housing and no critical reason to leave it, I would stay a bit longer and keep investing as much as possible.

I think if you tried to get a loan at 60 you would have issues, but not in your 40s. Japanese banks don't seem to have a problem with issuing loans that go past normal retirement age. Is the assumption that the kids will take on the payments if the lender cannot? Or that we will all have to work until 70/75? Who knows...

[eyeswideshut]

We eventually bought but only because there were no decent rentals in the area we wanted to live in. If it were not for that I would continue renting indefinitely. In my mind the primary issues to think about are quality of life, right to stay, and expense control. You can generally buy much nicer places than you can rent and so if you are not finding rentals in the area you want to live in that meet your expectations then paying more up front to buy may be a good choice. Secondly, if you own a place they can't increase your rent or kick you out. It is peace of mind. Finally is expenses over time. You will never make significant money selling properties in Japan but owning can be less expensive over the long run than renting (5 years is tossed out as the break even point by many). That said, this is not just a question of your mortgage but ongoing repairs and/or HOA fees, depreciation of the building and the time and money it costs to maintain a place. A great example is buying the place then finding out you need to replace the roof which is massively expensive.

Anyway, I always liked renting because if something went wrong I just call the landlord and they deal with it. It also offers the freedom to move on a whim. Now I have to do everything myself which is frankly, a pain in the ass. But on the other hand I live in a nice house in an area I like which offers a quality of life that would be difficult to obtain by renting.

Finally, I wouldn't worry about the mortgage - as long as you are employed banks will lend you money. Japan is so awash in liquidity they will literally lend to anyone these days.

[EmaxisSlim Cultist]

Thank you for the input everyone!

I think we will aim to continue living here for 5-10 years

We will decide then whether to rent a more modern apartment or look into purchasing.

[mighty58]

Why not just keep the subsidy and move to a newer/nicer apartment? You might have to pay a tad more out of pocket, but you'll likely be much more comfortable and the "Showa era living" issue disappears.

My wife also had a nice subsidy and we enjoyed living in a posh up-and-coming area of Kawasaki (no, that's not an oxymoron) in a pretty upmarket manshon for several years. I wanted to milk it longer, as it really helped maximize investments, and whenever I looked at purchasing options the numbers never made sense as the mortgage would have been much more expensive than our (subsidized) rent. But, when my wife needed to exit the company (and thus the housing as well), the choice became one between paying market-price for a new rental, or paying pretty much the same cost for a mortgage, and at that point it becomes more logical to buy. So if you don't see your wife leaving her position, I see no reason to give up the subsidy. By retirement time you should have enough to buy a place with cash in a lower COS area, thus negating any mortgage availability worries.