The housing conundrum: To own or not to own

After two decades of thinking about it, we are finally making the transition from renting to owning a home. When we first attempted to buy a home in the early 1990s we knew very little about what it would entail and were discouraged from following through with the purchase after realizing we couldn’t get what we wanted. Convinced we’d be renters for the rest of our lives, it wasn’t until the 2008 recession that we were forced to reassess our precarious situation as freelance workers and started to think seriously about buying again.

Middle aged, we were marginally employable, but had saved money during the years when our income was more than enough for our immediate needs, having invested it with varying degrees of success. In the end, we decided there was enough to purchase a home that would guarantee us a roof over our heads regardless of our work prospects.

The government also carried out its survey of the nation’s housing stock in 2008 — something it does every five years. Right now, there is a great deal of discussion about one statistic that emerged from that survey — the one that said 7.5 million houses and apartments in Japan were vacant. That number has likely increased since then, but at the time the media paid little attention, since the government didn’t want people to think too carefully about what it meant.

Now that number represents everything that is wrong with Japan’s housing situation, and the public has finally come to acknowledge something it had never faced up to before: that its homes will inevitably be worthless, if they weren’t already.

Homes are not the assets that the construction and real estate industries convinced people they were. Some blame this on shoddy construction or on short-sighted government policies, the bubble economy of the 1980s, even culture (“Japanese people only like new things”), but it mainly comes down to demographics. The population is not increasing and therefore there is a shrinking pool of potential buyers for the home you bought 20 years ago, or 10 years ago, or even yesterday. Unless Japan suddenly invites millions of new immigrants to its shores, it’s a situation that is not likely to change in any meaningful way.

So we are buying a home fully aware that we won’t get what we paid for it if we ever try to sell it later. We may be lucky if we get anything, and we’re OK with that. Since we don’t see much point in investing our savings anymore, we want to spend it on something that will buy us peace of mind, and for five years we’ve inspected houses and condos in the presence of enthusiastic realtors. But we were appalled by most of what was available. We knew what we wanted to spend and decided we would just keep looking until we found a place we actually wanted to live in at that price.

Our criteria were modest but firm, because in the end what worried us about buying a home wasn’t the fact that it wasn’t an asset, but that it might one day become a millstone. As that 7.5 million figure demonstrates, it’s one thing to not be able to get what you paid for, quite another to not be able to sell your home at all, or even be able to rent it out. That’s the future reality of being a homeowner in Japan, and it’s something people still don’t want to confront.

This reality also brings up new points of contention in the age-old argument about renting versus owning. Conventional wisdom says that renting is, basically, throwing your money away, a belief confirmed in a survey conducted by the Japan Housing Loan Planning Association (JHLPA) last fall. The association queried adults who didn’t yet own homes and received 15,000 responses, 87 percent of which indicated a desire to someday buy property. It’s a deceptive number since it’s possible that only people who are interested in buying a home responded to the survey in the first place, but in any case when asked why they want to buy a home, the highest percentage (67 percent) stated that renting is “a waste of money.”

However, the third most-common reason (multiple answers were allowed) is the most interesting: 39 percent said they want to own property because they see it as an “asset.” If you live in the middle of Tokyo or some other large city, a house might conceivably increase in value, but everywhere else it is a liability. Obviously, the myth persists.

When comparing the cost of renting to the cost of owning, there are more factors to take into consideration with the latter than with the former. The cost of owning a home includes the price of the home itself and the attendant interest of the loan to pay for it, property and other taxes, expenses for maintenance and depreciation of the structure. The cost of renting is monthly payments and contract-signing or renewal fees. The JHLPA calculated the money paid by the average renter to that paid by the average homeowner in Japan over a 30-year period ending in 2013. Homeowners paid ¥47 million and renters ¥46 million.

The difference is that the homeowner will theoretically pay off his loan someday, while the renter will continue paying rent forever, and this is where the association points out, with remarkable even-handedness considering its own interests, that prospective homeowners, especially those who haven’t decided yet, should look beyond the economic factors and “think of living in a place where you would want to spend the rest of your life.”

This is the consideration that brings the home-owning conundrum down to earth, because the main engine for growth in the housing market in developed countries is lifestyle changes. You rent an apartment until you get married, buy a house when you have kids, renovate that house as your circumstances change and in order to maintain its value, sell it and buy a smaller place when the kids move out, and eventually sell that for funds to support your twilight years.

In Japan, this ideal scenario of mobility, in which a person owns a succession of properties over the years and goes back-and-forth between renting and owning depending on the circumstances, doesn’t exist, or it doesn’t exist any more. Once you buy a house you are likely stuck there forever, and the norm is to buy something as soon as possible.

Once you understand this, you can then tally up the respective merits and demerits of renting versus owning, and the most convincing argument for renting in a housing environment like Japan’s is freedom, meaning the freedom to change abodes. Since it will become increasingly difficult to sell a home in the future, a homeowner’s mobility will be limited. Also, in a country like Japan where natural disasters are fairly common, renters have an advantage in case calamity strikes, since they can easily move. Not so much for homeowners, who not only have to contend with possible damage to their homes, but also the extra cost of repair, while still having to pay off mortgages even if the house is rendered unlivable. (This is a big problem right now for victims of the Great East Japan Earthquake.)

The main merit of owning is that no one can kick you out — unless, of course, you default on your loan. Renters have very few rights in Japan, since the government wants to prod them into buying homes, but they are protected from being evicted. Nevertheless, more and more old people who do not own homes are now forced to turn to public assistance to find rental housing (landlords famously don’t like to rent to the elderly). That’s not a problem if they own property. Even for younger people, owning a home offers protection from an increasingly fickle job market and a government reluctant to provide a proper social safety net.

Renters also have an advantage in the present market, since the more vacant units there are, the cheaper and easier it is to rent them, even in large cities. Right now the housing industry is enjoying a brief windfall thanks to the consumption tax increase in April — lots of people bought houses to beat the extra cost. But after that, it’s anybody’s guess what’s going to happen to housing and land prices. Last year, the government carried out its latest five-year survey of the housing stock, and will probably be announcing the results before too long. If you are a homeowner, it would be best to prepare for the worst.

Philip Brasor and Masako Tsubuku blog about Japanese housing at

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