Is Now a Good Time to Buy a Home in Japan? Survey Asks Consumers & Pros

In a recently released government survey, a majority of homeowners, financial planners, and homebuilders think that “it is a good time to buy” a home, in consideration of the two-and-a-half year postponement of the increase in the Japanese consumption tax to 10% and historically low rates for home mortgage loans.

The Japan Housing Finance Agency (住宅金融支援機構, below the “JHFA”), a wholly-owned government corporation basically equivalent to the Government National Mortgage Association (also known as “Ginnie Mae”) in the US, recently put out its report on likely trends in the Japanese housing market for the latter half of the 2016 fiscal year.

The report focuses on an August 2016 survey of what Japanese homebuilders, regular consumers, and professional financial planners think about purchasing a house or condo in Japan from October 2016 to March 2017, especially in consideration of the 2 ½ year postponement of the increase in Japanese sales tax to 10%.

The JHFA spoke with 1100 male and female consumers between the ages of 25-49 who are considering buying a home in the next year, 740 homebuilders with past experience utilizing the Flat 35 mortgage scheme, and 42 financial planners.

Buying Property and the Consumption Tax

As a general rule, Consumption Tax (shouhizei) is payable on the sale of a building in Japan, but does not apply to the sale of land.

In Japan, ownership of a building and ownership of the land where the building is located are separate legal rights.

This means that when land and buildings are transferred together, consumption tax is payable on the purchase price of the buildings only.

The seller is legally responsible for paying consumption tax to the national tax authorities (currently 8%), although usually the buyer agrees to pay the consumption tax amount to the seller along with the purchase price.

For more info, please see our: Guide to Japanese Real Estate Taxes

In June, Prime Minister Abe said that the government would delay an increase in the consumption tax until 2019, a move intended to support struggling households. The tax is slated to be increased to 10%.

In April 2014, the consumption tax was raised from 3% to 5%, the first increase in 17 years. Ahead of that increase, many potential homebuyers accelerated their decision to purchase a home, giving a noticeable boost to the residential property market.

Based on consumer behavior prior to the previous tax increase, many industry observers believe that delaying another tax hike will continue to grease the Japanese real estate market.

Negative Interest Rate Environment

The Bank of Japan also opened the door to negative interest rates early this year.

One result is that home mortgage rates have fallen to historic lows this year. The official “Flat 35” home mortgage rate dove below the 1.00% level for the first time in July, as announced by the Japan Housing Financing Agency (JHFA). Flat 35 loans are among the most widely used home mortgage products in Japan.

The JHFA surveyed consumers, financial planners and homebuilders on whether now is a good time to buy a home in light of these two factors.

The survey results are below:

Consumers

Fifty-eight point five percent (58.5%) of the consumers surveyed said from October 2016-March 2017 is a good time to buy, whereas only 8.6% said it wasn’t. 32.8% said they were not sure.

For those consumers thinking it is a good time to buy, they were allowed to choose up to three reasons. 68.9% said that an important reason for this was the postponement of the sales tax increase: 62.6% said it was a good time to buy because of the negative interest rate environment; 20.5% said it was a good time to buy because mortgage interest rates are going to go up in the future; 9.2% even said they thought it was a good time to buy because housing prices are sure to keep going up in the future.

Financial Planners

Financial planners were asked whether this year is a better time to buy than last year, and 69.0% said they thought it is. 4.8% said that it isn’t, and 26.2% were undecided.

Ninety-three point one percent (93.1%) of the financial planners who said it is a better time said that this was due to the negative interest rate environment, whereas only 24.1% said it was a better time since the sales tax increase was postponed.

Homebuilders

For Japanese homebuilders, 46.8% reported they expected sales to be up on a year-on-year basis when compared to the same period last year, 34.6% said about the same, and 18.6% said they expected sales to be down.

Sixty-seven point six percent (67.6%) of those who said they expected sales to be up said the reason was the fact that negative interest rates were introduced in the last year, and 24.4% said it was due to the postponement of the sales tax increase.

You may also be interested in: Basic Requirements for Getting a Mortgage as a Foreigner in Japan


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