Buying a cheap property in Japan can be the right decision for some people, but there are certainly things that a foreign buyer needs to consider before making their purchase.
Here is a list of things you will need to watch out for:
Property options for locals
The biggest reason that properties in Japan can be so cheap (and even free) is that the Japanese population has options. Japanese citizens have access to very low-interest mortgages at a fixed rate for 35 years, so instead of buying an older home, they have the option of buying a newer home because the mortgage cost is so low. Building a new home is relatively inexpensive in Japan, and zoning laws are much more free, so building a new home is a popular option for Japanese families. Also, rents in Japan are affordable, giving people another option. Multi-generational households are also an option for younger Japanese people. Instead of needing to buy a home, many young Japanese choose to stay at home with their parents. So as you can see, Japanese people don't have anything pushing them into buying a "cheap" home. The thing to keep in mind is that the Japanese housing market is a free and open market, and if the prices seem cheap, it is because there is a good reason for it.
Is the land leased?
One common reason for a lower property price is that it is on leased land. Leased land will require payments to be made to the landowner. You will be limited in your ability to renovate or sell the property in the future, and selling the property may be difficult because many people do not want to buy a leased property.
Is the property an akiya?
An akiya is an empty house in Japan, and there has been a lot of publicity about “free” houses in Japan lately. Many times these akiyas come with rules, especially if they are free. Here are some examples: 1) They may require you to live in the house for a certain number of years before they give you ownership. 2) They may require that you are of a certain age or that you have children of a certain age.
These requirements will vary between towns. The general theme behind the requirements is that the towns generally want to grow their populations and have new residents contribute to the economy of their town.
Is it really "free"?
Even if the actual house is free, there are closing costs that you must account for. A free home will incur a gift tax, there are professional services you will need such as lawyers and real estate professionals, and you will still have to pay all the normal costs such as moving fees and connection fees. And chances are that a free house will require renovations to become livable - which can become very expensive and time consuming. So there will never really be a "free" house in Japan.
Is the land agricultural?
Properties that are agricultural land, or have agricultural land attached to them could have certain requirements that need to be met. This could include that the sale be approved by a local agricultural committee, and possibly obtaining a farming licence/registration.
Is the location bad?
Location can introduce many challenges to property ownership. If the property is in an undesirable location, selling it in the future may be difficult. Many buyers will want a property that is close to schools, shopping, and train stations. Another issue with location is that some buildings cannot be rebuilt - usually due to limited access. This would mean that you could likely renovate the interior, but you could not rebuild or replace the home.
Is the property in a remote location?
If you are fluent in Japanese, this will be less of a problem. But if your Japanese comprehension is limited, remote areas can be challenging. Everything from street signs to communicating with your neighbors to getting things done at your city hall can become a headache. Even for Japanese speakers, regional dialects can make comprehension difficult. Thankfully, with new translation technology, things are getting easier, but it is still a consideration you must make.
Is there access to parking?
If you have a car in Japan, you will need a parking space. A car dealer often won’t even sell you a car unless you can prove that you have access to parking. And the further out from the city center you go, the more valuable a car becomes. So buying a property with parking makes it far more desirable to Japanese people.
Are there environmental risks?
Three of the biggest environmental risks are flooding, landslides, and tsunamis. If the property is at risk from any of these, that can often explain why a property is priced low. In northern Japan there can be major snowfalls that need to be cleared from rooftops - so you need to think about whether you will have access to the property during the winter season.
Is the population falling in the area?
Tokyo and Okinawa are projected to be the only prefectures with rising populations in the relatively near future. The further you move away from major city centers, the more severe the population decline is likely to be. So you want to be careful about buying into a town that is going to be losing people and the amenities that larger populations support. This could mean buying in a location where the schools end up closing, or the hospital, or the grocery store.
Is the building older?
Japan has a mentality of impermanence, and this applies to buildings as well. A 30-year-old wooden house in Japan has essentially lost all of its value. This means that buildings are often not maintained very well because why would you spend money on a house that will certainly go down in value. This is a hard concept for some foreigners to understand coming from countries where the value of homes tends to appreciate. So keep in mind that the value of the building that you buy will go down over time in Japan.
Another age-related consideration is building materials. There are toxic building materials such as asbestos in many older buildings (a “total ban” on asbestos was only achieved in 2012 - a general ban has been in place since 2006). Termite damage is very common in wooden buildings in Japan.
The general build quality of buildings is also a consideration. Many post-war buildings were built quickly and cheaply - with build quality generally improving the newer the building gets. Earthquake standards also improve with age, with a major earthquake building code change occurring in 1981 (The 1981 Building Standards Act - Shin-Taisaku). Another seismic resistance requirement upgrade occurred in 2000 (Side Bracing, Performance-Based Design, Dynamic Analysis, Joint and Connection Design, Foundation and Soil Considerations, etc).
Building style and dimensions also need to be considered. One example is ceiling and doorway height. Younger generations in Japan are considerably taller than previous generations - so they aren't interested in hitting their heads on the doorways of older homes.
Has the property been on the market for a long time?
This is often a good indication that Japanese people are not interested in the property - and this shows the problem with the low liquidity of “cheap” homes in Japan. Chances are you want to be able to sell your property in the future - you never know when life will change your plans. So buying a property that will be difficult to sell later can be a risky move.
Is buying a “cheap” house a bad idea?
It all depends on the individual. Are you handy with tools and able to fix your property up yourself? Do you work remotely and don’t need to be in an area with job vacancies? Are you planning on holding the property for many years and not worried about having to one day sell your property? Do you prefer a quieter pace of life in Japan? There are many reasons why it might make sense to buy a cheaper property. Hopefully, this list of considerations helps you decide if buying a “cheap” property is the right decision for you.
Is It Really A Cheap Property?
