Buying a house vs buying an apartment

I have come back to live in Japan with my (Japanese) wife and we are thinking of buying a home in Tokyo.

What I can't seem to get to the bottom of is with the shorter lifespan of property here how does an apartment retain its value when we ''own'' such a small area of the land on which apartments are built?

We would really prefer to buy and apartment but owning land seems so much more secure - there is always a measureable value.

If we buy an apartment we are thinking of buying an old one and renovating. However, from what I understand the property management can propose that the apartment block should be torn down and rebuilt. What happens then in terms of cost. The monthly building repair fee doesn't appear to be enough to cover the cost of rebuilding...

Unless I am way, way off line, condominums apartments in Japan should follow the general principles that started in Europe many centuries ago then spread to various continents around the world. Condominiums (buildings in which each apartment is owned, not rented,by a family) are a business managed by a board of directors (directors are owners themselves, elected once a year from amongst all the owners). The board makes sure that the building structure is safe and properly maintained, that utilities (heating, plumbing etc.) and common areas are maintained, upgraded, renovated as needed.
Some boards, especially in big buildings, delegate the hands on maintenance to a management society but the owners, through the board, have full control (I was on the board in my building and get monthly minutes). Only the owners, not the management society, could decide to tear down and rebuild. What would likely happen is that the owners of, for example, a 40 years old 7 stories building in a very good location would sell the building and land for a high price to a company interested in building a 40 stories tower. The condo owners would share the money and buy homes (houses or apartments) somewhere else. In Europe there are condo buildings that are 300 years old and in very good shape. In the USA, especially in New York, Boston etc. 100 years is not exceptional.
I have read that houses and apartments buildings in Japan
are torn down after 30 years but I have seen houses and apartments buildings much older than that and they were in good shape. It seems that manshions lose value for the first couple of years, something unheard off in other parts of the world.
I apologize if I am way off base about Japan, but at least you will have an idea of how it is in other parts of the world and I would like to hear how it is in Japan (by the way, anyone who has bought or lived in or visited houses built by Toyota? I check their site regularly)

you might be interested to know that in some European countries renting an apartment is like in Japan: the renter pays a fee to a rental agency and several months deposit to the landlord plus the so-called key money that is in fact a gift to the landlord!. obviously when you rent the landlord can decide to tear down and rebuild at any time. some countries have laws forcing the landlord to give the renter several months notice, help the renter find a new place, pay the renter moving costs etc.

Many thanks for the info. It does provide some background. Clearly buying an apartment in a lower rise block would be the safer bet as being attractive to developers.

With some more research (which is limited in English) I have read that houses tend to be pulled down after 30 years (more likely to be the wooden structures) while apartments are considered to have a 60 year life.

Having said that Mitsukoshi in Nihombashi was built (I believe I read) in the 1950's and that looks in good condition.

The swings in climate (from extreme humidity in summer to intense dryness in winter) tend to have a deterious affect on property here it seems. That and the recently improved earthquake technology make newer apartments more attractive.

As for losing value in the first few years - you are right. I was amazed with the prices of new condominiums which can be double the price of a 30 year old apartment. Marketing and a preference for new have seemingly allowed property developers to make enormous margins on new... However, there is a current renovation boom - it certainly is a much cheaper option.

I wish more people would answer and give us the goods from a Japanese point of view. I am really interested too.

the story about private houses being pulled down after 30 years is very dubious. I don't know how familiar you are with Japan but during my travels I see lots and lots of "modern" houses from the 1950s-60s and also real old houses,wood ones, all over the place. Indeed some companies are buying old wood houses that owners want to replace by a modern one then take them down carefully and rebuilt them some place else for someone who love them. Or they renovate an old wood house on the old lot for owners that do like the old place but want it better to live in. There are several monthly magazines in Japan that show nothing but theses new-old houses. This is similar to Europe where there are houses with a wood frame that are 500 years old and get renovated every 100 years or so..(baths and kitchen are renovated more often..)
look in Japanese newspapers on the internet. many have ads for "manshons" with plans, photos etc. some pages are in English, for others just click on the tabs..
look into http://www.toyotahome.co.jp/ their houses are really great!
when the page in Japanese open look by the bottom of the page. there are several short columns, all with a green heading. click in the second column on the 3rd line from the top(not including the green heading)for an index of already built homes with photos and plans (click on each photo to get these details). you can also click on "translate" near the "toyotahome" line when you get a google page with various sites about Toyota. It doesn't always work and their googlish English is???
good luck.

Think of a home in Japan the same way most other countrys think of a car. The older it gets, the more value is lost during resale. That is the home itself, not the land, just the building. Land prices tend to go up over time.

In Japan, the rule of thumb is new is best, used is less. Some apartment buildings, and condo complexes have a ''shelf life''. What i mean by that is that the owner/owners of said building feel that after X amount of years its cost effective to bulldoze the building and rebuild. Some complexes have an extra monthly fee that all tenants pay into and over the course of say 30 years adds up to enough to rebuild. If you are an owner of a condo in a complex, you get a piece of the action when the place is rebuilt/sold/remodeled.

For an American this is good news because home prices in some areas are low due to the age of the building.

In most larger cities your paying for the land that the home sits on, rather than the home itself. New construction due to lower taxes is ofter more cost effective than buying an older home.

Hope that helps a bit.

also check this link, i asked a similar question the other day.
http://www.japanforum.com/forum/living-japan/12353-depreciat...

Private homes, especially wooden ones, have a typical average life time of only about 30 years due to humidity and other factors. Of course, this does not mean that there are no houses older than that. It is an average. It compares to an average of about 60 years in the US and an average of about 100 years in the UK, according to a house maker company I have been talking to.

Steel buildings (most buildings of three or more storeys) have a longer life span.

Uji

Thanks for your amswer. Do you have any knowledge of the advantages/disadvantages of buy an old apartment and "reforming" (by skeleton reform where the apartment is gutted and rebuilt inside) versus buying landed property?

I am afraid, I do not have such knowledge. But I think it also depends strongly on where in Tokyo you plan to live, i.e. central vs. suburbs vs. countryside. Land in central Tokyo is prohibitively expensive, but becomes more affordable the further you are willing to move into the suburbs or even countryside of Tokyo or surrounding prefectures.

Whether or not a house is pulled down after 30 years depends a lot on how well it has been maintained. I have lived in a couple of 30 plus year old buildings that were not well maintained and they were in terrible condition and were quite uncomfortable to live in, especially with the lack of insulation. I am very thankful there were no large earthquakes or fires while I was living there as those buildings wouldn't have stood a chance. Both buildings were pulled down within a couple of years of me moving out (they were houses with several bedrooms that I shared with Japanese friends- the rent was very low obviously).

In the area I live in now, many of the old houses and shop buildings (meaning around 30 to 40 years old) are very dilapidated and tend to be pulled down one after the other.

In contrast the house my husband grew up in in Kanagawa is now about 35 years old and as his father kept it well maintained it is a perfectly comfortable, liveable place and looks newer.

That kind of well-maintained older house seems to be more of an exception though, and in general I would consider buying a house more than 20 years old in Tokyo at least to be a very bad investment, unless you bought it only because you wanted the land. Places like Kyoto are a different story of course, with the old machiya being very valuable.

A bit more about buying an apartment unit - this comes from myself who bought a used apartment unit (in a relatively low-rise building) a few years ago.

I agree with Sensei 2 on how the board of directors (= owners of apartment units in a building) decide what to do, and that the management company is in a way hired by the owners to do maintenance of common areas, etc.

The reality is that at times some/most of the owners are not quite interested or don't have the time to really look into administrative issues
to properly make decisions on their own, so that certain issues might be left completely up to the management company, at a price offered by them, even though officially the decision goes through the board of owners. Of course, something as big as tearing down a building would require everyone's consent, though.

The monthly repair fee, by the way, is not for rebuilding, but for what is called "major repairs/maintenance." This refers to something that is done
normally every 12 - 15 years (normally at 12 - 15 years, then another 12 - 15 years, then after every 10 years), something that requires scaffolding all around the building, lasts two months or so to complete - doing waterproofing the of roof/balcony, chemically cleaning and re-doing outer wall tiles, filling in concrete cracks if any and painting the outer walls if necessary, etc. This is something that needs to be done periodically to properly maintain and make the building last. The one I live in now is facing its first major repairand the board of directors imcluding myself are hiring our own architect to inspect and decide what repairs at really needed, so that we don't have to say yes to everything that the management company offers. (The architect we talked with said that it would be ideal if all the "major repairs" until 50th year can be covered by the repair fees everyone pitches in, without additional lumpsum payment.)

If you are thinking of buying something really "old," meaning 30 years or older, I actually do not recommend it because those buildings would have
been built before the newer construction regulations (stricter in terms of earthquake resistance) came into effect, thus structurally weaker, might not have the floor concrete thickness you might want (for better noise-proofing), might not have the extra in-wall wiring flexibility you
might want (in case you might want two phone lines or other computer wiring done), etc. I can't recall the title right now, but there is a good book (in Japanese, about properties in Japan) on purchasing second-hand apartment unit, describing buildings built at different times (70s, 80s, 90s, etc.) with their distinct features.

Also, renovating is limited - no punching out of structural walls (of course), you cannot do anything to the outer surface of the apartment unit
without the board's consent (the inside of the apartment unit is yours, but not the outer wall - so if you want to put a double lock on your door, for example, it will require the board's approval). If you want to change the layout of the rooms, I think you will need to ask when you look at the property with a realtor if it would be OK to do such modification.

Just BTW, our reasoning for purchasing the apartment unit (at its 11th year) was that we wouldn't have been able to afford brand-new apartment with the same size, and that it would make more sense than renting, but it was definitely not for property value. It would be fine if this place lasts as long as our lives (we have no children and we are in our 40s - 50s) lol.

Thanks for all your responses. We're still investigating the idea of renovation which (funnily enough!) reform companies think is a great idea. All a matter of sifting through all the marketing I guess.

However, I came up with a question which my dear wife answered with that wonderful catch-all response "shoganai."

Indeed... We were sent a floorplan of what appears to be a nice apartment, 10 years old which we are going to see this coming weekend. As far as I can tell there are just three apartments in this block.

Logic as I see it (which may not be worth that much) suggests that on buying it we would own 1/3rd of the land. However, there is a monthly car park fee...

If I own 1/3rd of the land why do I have to pay to park on it? If I do have to pay then to whom do I have to pay the monthly fee?

I haven't seen the place yet so maybe it's land to the side which the develop owns... but this issue does annoy me a bit...

Anyone have any experience with this one?

Wannabe,

Having to pay a monthly fee for a parking space adjoining an apartment block is not at all uncommon, and is probably the norm. When you buy an apartment, the only bit that you are actually free to do as you please with is *inside* the walls of your apartment. While on paper you own one third of the land on which the block stands, which actual piece of land will not be specified, and the land around the apartment will probably be specified as "shared use". Therefore you are not free to park on it or use it for your own purposes. The monthly fee will probably be paid to the maintenance company that runs the apartment.

Wannabe,
I assume that, if you like it, you are planning to buy this apartment? if the apartments are for sale then the building is a condominium, even with only 3 apartments..(or a co-op, a set up that may not exist in Japan). You may have to pay for parking because there was no free land for a parking on the lot where the building itself is located. This is quite common in Japan, Europe, some parts of North America etc. In the North American town where I live indoor or outdoor parking is usually included, "free" of charge, but in some buildings apartments are sold without a parking to keep prices low. Car owners must pay $ 20 000 and up for one parking spot! Anyway, if you buy in a condo, even a small one, there will be bylaws, a budget, a board of sorts (mandatory I think)etc. and you will have to pay a monthly maintenance fee plus pay into a reserve fund for repairs etc. in addition of your mortgage, property taxes, utilities,etc. A 3 apartments building can be managed by the owners themselves (we have 47 suites in my building and are self managed). I only mention all these things as you have to ask questions before buying..also if you intend to do heavy duty renovations you will need the OK of the other owners and perhaps also get a building permit from city hall, especially if you redo water pipes and electrical circuits. By the way, you own not only the area occupied by your apartment, including any balcony or deck, plus 1/3 of any common area: hallways, stairwells, storage rooms outside your apartment,lawn or flowerbeds etc.

Thanks for all your responses. In the end after a lot of searching (and not a lot in our price range) we ended up buying a 26 year old apartment in a good part of Tokyo for a price we are happy with. It has a strict height restriction and has only 9 apartments in the block so we actually get a decent share of the land. According to the per square metre prices we actually paid less than the value of the land. However, after the reform it is obviously more.

We learned a lot about the problems of older apartments, the lower ampage ciruits, problems with internet connections, modern fittings that are made for standard sizes which our apartment is not...

Gotta say that the process of skeleton reform is frustrating too and if anyone does this make sure they are organized. You have to keep on top of them to make sure things are right. The group we used was ok but my wife especially had to be on top of them all the time to make sure that things were being done correctly.

In the end we are delighted with our purchase and the reform but will be glad to move in (next Wednesday) and settle down to a normal life again.