Its a familiar enough choice, one that individuals and families face up to everyday, all over the world. Is it better to rent or to buy my home? So how about when it comes to Tokyo?
Just as those in London, Sydney or New York will be considering wether or not it is worth arranging financing, placing a down payment and pulling the trigger on a home purchase, it is now a much more serious proposition for foreign residents living in Japan, even those who intend to be here for just a few years.
You are likely familiar with the general arguments about buying or renting your home. Purchasing a property builds personal wealth, gives you equity you can trade on in the future and provides greater flexibility with your lifestyle (you are freer to do renovations for example).
In Tokyo, there are local factors which add extra incentive. Chief amongst these, is that it is now much easier to arrange Japanese financing as a foreign buyer. Housing Japan works with a number of banks in Japan that are open to foreign lenders, including a noted Japanese mega-bank. Terms are identical to those offered to Japanese citizens, with very high LTV (loan-to-value or price). The effect of this loan option often means that your monthly repayments will be cheaper than your apartment`s rental fees.
Additional costs will of course need to be factored in, such as maintenance fees and local taxes, however, in many cases, even with these included, the price will still be cheaper than renting.
Compare Tokyo to other major global cities and you will see that property here is also relatively cheap. Prices are not being artificially inflated by limited supply, as in somewhere like Hong Kong or Singapore, where land area is restricted. The market is also driven largely by domestic demand and not by foreign buyers or stay-away owners, as in London or Vancouver.
With price, LTV and monthly repayments generally following this pattern, you can feel confident in the price that you are loaning against in Tokyo.
Furthermore, many central areas of Tokyo are seeing capital gain, creating the opportunity for selling at a profit in the future (especially so if the yen gains in value at a later date and you transfer your money into a foreign currency).
Although nothing in life is ever certain, this is a trend that Housing Japan believes will continue into the future as Tokyo`s international business status develops, more young Japanese continue to move in through internal migration and major infrastructure developments come into play.
For many young Japanese and expats who are increasingly making their home here, Tokyo is primary rental market, but by owning a property you will have the opportunity to earn income from it by leasing it out should you expand to a new home or leave Tokyo in the future.
Whereas in many major-western economies, banks are often noted for increasing their restrictions on getting a loan, Japanese banks are moving in the opposite direction. Foreign residents, with good income in an established company (especially those with a permanent residency permit) are now in many cases actively being welcomed. Japanese banks are having a a hard time finding enough suitable Japanese clients, especially in the luxury property market, and with the central Bank of Japan punishing retail banks that fail to lend, there is added incentive for them to be open and business friendly.
Another factor in your decision to purchase a home could be the coming 2020 Tokyo Olympics, with some investors targeting opportunities around here – specifically properties close to the new urban developments or close to landmarks (such as the Olympic village in Toyosu and the national stadium close to Jingu-mae and Omotesando).
Those who target well, ahead of the uptick in prices have a high chance of seeing their personal wealth rewarded.
For anyone who intends to live in Japan for the next few years, or even long-into the future, building up a portfolio of long term assets and security will put you in the strongest personal situation. Japan offers some of the lowest home interest rates in the world and an extremely attractive property market.
Of course, it may well be that you are also the the type of person hat prefers renting or is not yet sure of how long a relationship you will have with Japan. Depending on where you choose to live, renting may will end up being the better option – it depends, as always on your personal situation and what your individual priorities are.
Contact us to speak with an agent and find out more.