How an Average Family in Tokyo Can Buy a New Home
[G] In Tokyo, you can buy a brand new single detached home for about 300,000 US dollars you might ask, how is this possible in the city that in 2016, Monocle declared the most liveable city I know, i know, Monocle is a British lifestyle magazine Not the UN Human Development Index, where Japan ranks 20th But still, I feel safe in saying that Tokyo is a major world city and I think a lot of people would be surprised that a new detached home can be in reach for the average family. So I’m going to get to that housing story, but first I have to sidetrack a bit and to find a few things This video will be about buying a new home in Tokyo, a city in Japan. It is important to distinguish this because there is also the prefecture of Tokyo or Tokyo metropolis. A prefecture is like a state or province Also equally important to distinguish is that we’re not talking about the Tokyo metropolitan area, which includes multiple prefectures and cities and has over 30 million residents Nope, that’s not the Tokyo we’re talking about either. We are talking about the 23 special wards of Tokyo that contain roughly 9 million people In English, the wards call themselves cities, but they’re closer in terms of function to what a borough of London would be. In any case, the specific ward within Tokyo, I’ll be looking at today is Edogawa. Sidenote, Edo is the old name of the city of Tokyo and Gawa means river. So the ward name literally translates into Edo River. Edogawa city is on the eastern edge of Tokyo If you go any further and across the Edogawa River you’ll find yourself in the prefecture of Chiba. Now you might be thinking, okay, so this place is on the outskirts of Tokyo Well now not really. It’s a 34 minute train ride from Mizue Station to Shinsen-Shinjuku Station which is at the heart of the Shinjuku, the major government and business district in Tokyo. It’s a 14 minute train ride from Kasai Station to the literal heart of Tokyo, Nihombashi Station. Where the Nihombashi Bridge is located. Nihom means Japan and Bashi means bridge, so the name directly translates into Japan Bridge. and it’s the point from which all distances to the capital are measured. My point with the map and distances is that depending on where you live in Edogawa and where you want to go in Tokyo, you can be anywhere from a 15 to 16 minute train ride away Even though Edogawa is on the eastern edge, you’re still very close to the thick of things in Tokyo not often the boonies and yes you can go out to the boonies in the prefecture of Tokyo, like when I visited Okutama in the far west. Even though we could easily get to more popular parts of Tokyo from Edogawa Edogawa is still a populous area with all the amenities you could want You don’t need to own a car, besides commuting to work, you don’t really need to leave the area if you don’t want to. To get an idea of the density of Edogawa, the population is roughly 700,000, all living in 49 square kilometres. That’s 13,750 people per square kilometre, to compare, The Bronx, a borough in New York has 13,231 people per square kilometre. Although I’ve never been to The Bronx and can’t compare the feel of the neighbourhoods, on paper the density as well as the proximity to major attractions are quite similar. So what does the housing look like? Let’s go on a quick tour Right now we are looking at homes that are 30 to 50 years old most of these homes no longer have any value, so if an owner were to sell they’d most likely be bulldozed and rebuilt. Accordingly, it’s quite common to witness demolition scenes like this. Once the homes are demolished, new ones are put in their place and it’s not uncommon for two houses to be built where there use to be one. And here’s what some recently built housing looks like Some called these “pencil” homes, as they’re tall and skinny not all of them are pencil shaped though. In addition to single family homes there are a couple main kinds of multi-family housing, these are called apartos, which come from the word apartment. They’re generally 2 or 3 storey units, built of wood and they would normally be rented by singles or couples. When people talk about cheap Japanese housing with paper thin walls I think this is usually the type of buildings they’re referring to. These are called mansions, as in mansion and despite the grand name, they’re apartment buildings made with reinforced concrete. They’re are generally 3 or more stories and the units will be bigger than the apartos and thus be better suited for families. Some of these buildings will be for rental, while others will be condos that are owned by individuals. Some mansions are also owned by the city and used for affordable rental housing you often see many of these buildings clustered together. A dead giveaway is that if you see numbers on the sides of the buildings. You might find yourself wondering, is the housing really affordable for the average earner in Japan and if so, why? One thing you need to know is that in the past 25 years, Japan has grown in population by about 3 percent. Whereas countries like the US and Canada have grown around 30 percent. After the bubble burst in Japan in the early 90’s, land prices never recovered to their formal peaks. It’s been expected that owning a house is not an investment but a depreciating asset. In recent years, pricing has levelled out and even grown in Tokyo but with the population of Tokyo set to decline in the future property growth is far away from being certain. Despite the precipitous drop in housing prices after the bubble land is still expensive in Tokyo. For example, this plot of land in Edogawa is roughly worth 3 thousand dollars a square metre Where I used to live in Burnaby, a city in metro Vancouver It’s about 2 thousand 5 hundred a square metre, so fairly comparable. However, since lot sizes in Burnaby can be from 5 to 10 times the size of those in Edogawa the density in Burnaby is only 2,464 people per square kilometre. Edogawa is 5 times as dense, which is a big reason why homes in Edogawa can be in reach for the average household. If you want a single detached house where I used to live it’s go big or no home. A tricky part when talking about affordable, is that you need to define exactly who it’s affordable for. The median annual household income in Japan is 37 thousand dollars in comparison, it’s 41 thousand in Canada and 44 thousand in the US. By the way, this median stat means that half the families make more than that amount, and half make less. Now that 37 thousand dollar number is for the whole of Japan. In Edogawa, it’s 43 thousand.
What can a family making that afford? The maximum borrowable amount, with no down deposit, is about 300 thousand dollars with 15 percent down, that number bumps up to 350 thousand dollars. On the really cheap and small end for new single detached housing, you can get in for a bit over 200 thousand dollars. However, I’d say a low end is more like 300 thousand, with mid-range going for about 400 thousand. Custom and/or concrete housing will most likely be over 500 thousand. The biggest factor in home pricing is almost always the land which is about 70 percent of the price. but of course that really depends on the location. Let’s talk about mortgages. Beyond the sticker price, the real cost of a home includes the interest that you’ll pay on a mortgage over the years. Interest rates are always changing, but let me say that you can rather easily get a variable rate of 1 percent in Japan right now. The Japanese government also supports a FLAT 35 loan which means you can lock in a fixed percentage for up to 35 years. Depending on your down deposit, bank, and length of loan the rate can be anywhere from 1 to 2 percent. On a 300 thousand dollar house, a 1 percent interest rate for a 35 year mortgage is 850 dollars a month. At at 3 percent rate, the monthly payment becomes eleven fifty a month, a 35 percent increase. So yeah, interest rates make a huge difference. Let’s talk about zoning and this is where I got to give props to Japan’s zoning laws. In Japan, the zoning laws for buildings are prescribed at a national level which all municipalities have to follow. hey can make some exceptions, but by and large they have to follow what the national government dictates. And the zoning laws are rather straightforward. There are 12 zones The first one being a type of residental zone each subsequent zone allows for more and bigger types of buildings. It goes like this all the way up to industrial zones, for things like factories or gas refineries. The magic in the zoning laws is that whatever is allowed in zone 1, is also allowed in the following zones. With some exceptions you can build residential housing anywhere. You can also run small businesses like a little café within your home, right in residential areas. This is called mixed use, and this means that there’s nothing stopping someone from opening up a small shop in a residential neighbourhood. So that’s why you can generally walk to a convenient or grocery store and get most of your daily needs without owning a car. Once you get into the more dense zones, you see the mixed use come even more into play. This is where you can have a big 20 story condominium next to a single detached home. Everything is fair game as long as you follow the rules on how big a portion of the lot the building can sit on, how tall it can be, and how much light you can block. Not only that, you can also end up being able to build on really small parcels of land. The minimum legal street frontage for a house is 2 metres enough width for a car to be parked on the block. So while land is expensive in Tokyo the ability to purchase small parcels of land makes it possible for the middle class to own a home whether it be a condo or single detached house. From walking around the neighbourhood and seeing all the new starts the minimum parcel of land for a 3 or 4 LDK seems to be around 60 square meters or about 650 square feet. After scanning through the pile of new home flyers I picked up I’d say the average is about one-third more than that in size. So think 80 square metres, or about 860 square feet. Something interesting about the plots of land is that since they are not necessarily perfect square or rectangles the amount of usable space depends on the shape. In that way, a 75 square metre lot may be as practically useful as a 60 square metre one and you’ll see lots of dissimilar sizes right next to each other priced the same. The Financial Times talks about why Tokyo is the land of rising home construction but not prices. Takahiko Noguchi, head of planning section in Minato Ward explains why. “There is no legal restraint on demolishing a building,” he says. “People have the right to use their land so basically neighbouring people have no right to stop development.” Right, so provided you follow zoning regulations, you’re A-OK to build. Woah, woah, woah! What’s with the 80’s music. I was thinking the same thing myself. I mean, I was born in the 80’s, maybe it’s my subconscious trying to bring me back to a time a time where my father in his 20’s could afford a new home and support the entire family on his wage alone. Ah, the good old days! But back on topic. I’m sure you must be wondering Is Tokyo or Japan really a good place to live? And maybe you’re thinking The houses you showed didn’t even have yards and aren’t they small and cramped? Also, you may have heard that in Japan, homes only last 30 years and there are tons of abandoned buildings! Yeah, yeah, I hear ya. I’m making videos that talk about those topics and also have some new home tours to show you, hang tight. In the meantime, feel free to ask some questions in the comments section. And before I forget, I want to give a shout out to all those who support these mini-docs through Patreon. Thank you so much! As always, thanks for watching and will catch you on the flipside.