Should I buy or should I rent?

The differences between renting and buying are generally the same across most countries. There are many foreign residents who have made their dream of owning their own home a reality in Japan. There are also just as many renters. Approximately 60% of Japanese own their own homes. In some prefectures, the ratio is much higher.

Let’s consider the benefits and disadvantages to both below:

BUYING

Advantages to buying:

  • With Japan’s low interest rates and relatively high property yields, your mortgage repayments will typically be less than the rent you would pay for the same apartment, even when you add in property taxes and monthly maintenance. This means for the same amount of rent, you could purchase a larger or better property, or you could buy a similar property and have much lower monthly payments. Click here to read more about mortgage payments vs. rent expenses.
  • Freedom to redecorate and add value to your property.
  • No longer having to deal with a landlord.
  • Depreciation and other tax benefits may be applicable.
  • If you return to your home country or move to another part of Japan you can always rent out your property, or keep it as a base for whenever you visit (if you have a home loan, however, you will need to consult with your bank before doing this).
  • You will have an asset that you can pass on to your children one day.

Disadvantages to buying:

  • You are responsible for the costs to maintain the property.
  • Less flexibility. If you grow to dislike the property or surroundings, significant time and cost may be involved in selling it. Selling at the wrong time may result in a loss on your initial purchase.
  • Requires a large sum of cash upfront for deposit and other expenses due at time of purchase.

RENTING

Advantages to renting:

  • Flexibility. If you do not like your current place you can move to a new place or try a different neighborhood. If you are facing some uncertainty with your job, renting is the best choice.
  • For expats who have their rent deducted from their income by their employer, they may have a lower taxable income and less income tax.
  • No maintenance hassles. The property management company and landlord take care of property maintenance.

Disadvantages to renting:

  • Rent is dead money. You are paying off someone’s mortgage (and then some!).
  • You cannot alter the property to your liking.
  • The majority of rental leases are minimum 2 year terms, which would not suit someone who only visits Japan several times a year for extended trips. Landlords will rarely rent to a non-resident, leaving tourists with the more expensive monthly serviced apartments.
  • There may be considerable expenses involved in moving, so it is not always as easy to move to a new address.
  • You may be at risk of rent increases or termination of lease by landlord.
  • It’s not easy after retirement. The elderly tend to face a lot of discrimination when trying to find a place to rent.

CONCLUSION

Ultimately the decision to buy or rent is a personal one and will depend on your individual circumstances and long-term plans. For those in Japan on a short-term assignment, renting may be the best choice. Those planning to be in Japan for the medium to long-term may consider buying.

If you are new to Japan, a good option is to ‘try before you buy’. Renting a property to begin with will give you time to explore and find neighborhoods you like, and get a feel for the type of homes and apartments that are available. This will allow you to make an informed decision if you do decide to purchase in the future. Also, mortgage options for foreign residents who have only just arrived in Japan are limited, but with permanent residency or a spouse who is either Japanese or has permanent residency, along with an established work history in the country may open up access to more financial institutions and better loan conditions.

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