By Jeff Wynkoop
If you want to build a house in Japan you will be faced with a lot of decisions. For most people, the most time-consuming issue is finding and acquiring the rights to a suitable parcel of land in the area of town they want to live in. However, even if you nail down the right location, there are a plethora of other issues that have to be resolved, for instance, how much it will cost, how much deposit will be necessary, what type of mortgage loan will be best, etc.
To assist those grappling with these issues, we have compiled the results of a survey of 206 Japanese couples who had their dream homes built between 2011-2014. Although not exhaustive, this should provide at least introductory information for those thinking about leaving the renting game.
How much does it cost to have a house built in Japan?
The answer to this question is naturally a function of how much house you want, and the special features you believe are ‘must-haves’. The average construction cost according to the survey was 31.2 million yen. Over 70% of those surveyed said the total building cost was 35 million or less, and a little less than one-third paid less than 25 million for construction costs.
How much deposit will be necessary?
Before a construction company will begin building, most companies require a deposit of 10-20% of the estimated final costs. Over 40% of those surveyed paid 12 million or less in deposit, and over 25% paid less than 4 million yen in deposit.
What type of mortgage loan will be most appropriate?
There are three main types of mortgage loans in Japan: fixed interest loans, variable interest loans, and loans than begin with a fixed-interest term and then become variable after a period of time (usually 10 years). Traditionally, this third type has been most popular in Japan, although recently full variable interest loans have been gaining in popularity.
For fixed interest loans, the interest rate won’t go up during the fixed term period, but typically the interest rate on these loans are higher than variable interest rate loans.
Over 70% of those surveyed chose either a pure variable interest rate loan or a fixed term then variable interest rate mortgage loan.
The famous “Flat 35” loan which is sponsored by the Japan Housing Finance Agency and offered by many Japanese banks is a fixed interest loan with 35-year repayment period. 16.5% of those surveyed used the Flat 35 system.
What level of monthly mortgage payments will be acceptable?
Naturally the answer to this question depends on your budget, but this is where the savings really comes into focus when compared to renting.
Over 50% of those surveyed have payments in the 80,000-100,000 yen per month range, and almost 70% of those surveyed had monthly payments of less than 100,000 yen.
Nevertheless, owners have to pay the Japanese fixed asset tax (property tax) every year, so those wishing to own should take this extra tax expense into account when considering the real costs of building and owning a home in Japan.
Should I buy the land, and if so, how much will it cost?
As explained above, finding and securing the rights to the land is the main hurdle for most of those wish to build their own マイホッム (“my home”). Only 70% of those surveyed actually bought the land outright (versus those who entered into ground leases or inherited the land). Almost 65% of those surveyed who bought the land paid 10 million yen or more, exactly 25% paid 20 million or more, and 11.1% paid 30 million or more.
You may also be interested in: Should you rent or buy in Japan? and Basic requirements for getting a mortgage as a foreigner in Japan
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