realestatejapan
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realestatejapan

Cost of Building and Renovating

What I learned about building costs in Japan

Photo by Brett Jordan on Unsplash

Needless to say, people in Japan love new things — electronics, cars, and even houses. Most foreigners still have trouble with the idea of a “new house” and “old house” — but that is literally how its viewed and called in Japan. I talk to the realtor and say “I’m looking for an old house / 中古を探してます.”

I spoke to 5 or so housebuilders in Japan. From this experience I am generalizing my findings.

Base Cost Per Sqm / Tsubo

The costs per square meter or tsubo (3.3sqm) vary between home makers but are centered around 1m JPY / tsubo, or 3m JPY / ~$3,000 / sqm. (Get used to thinking in tsubo, it makes life easier later…). So a 100 sqm house is roughly 30m JPY or ~$300k.

This varies dramatically and there is a long tail where you build the most magnificent house of marble and gold for 10x more, but you probably won’t get any cheaper than 30% less from a major builder.

Meet The HouseMakers

© Google Maps, Komazawa Home Exhibit Zone

There is a fascinating place in Meguro which I think is called the Komazawa Exhibit Home area where a dozen or so major homebuilders have set up demo houses that you can make an appt to walk thru and get estimates for your dream home. The Japanese have streamlined this to be like shopping for a car or a TV.

Each home maker has some thing that they say makes them different, ie:

I didn’t visit too many because in the end they all say they are the best and it is hard to know the difference — I really believe they are 90% the same, with ones like Sweden and Open House being at the top and bottom of the pre-fab builders out there.

A few other names I looked at were RantaSalmi and Wald — Ranta doing fancy log builds and Wald focused on passive heating/cooling — ie, super energy-efficient “Passive Haus” houses. Both have that northern Europe sturdy feel. (Worth noting Japanese houses are a bit cheaply built to last just 30yr and poorly insulated).

The other alternative is to hire an architect and custom design your home rather than a house that looks like every other house. This may start at +30% baseline to costs but a good architect might save you some money. I did not really evaluate this option. The caveat on a custom build resale is that unique houses aren’t popular with the very conformist Japanese population.

New Home Estimates — Caveats I Learned

The initial estimates tend to be lower until you add all the fees and options. I guess they assume you can always afford (beg, borrow, steal) another 30%+ so do expect overruns. Things that I didn’t initially think about that hiked up the estimate:

  • Sales tax 10% — sad given the tax in Japan used to be a mere 5% not 8 years ago. This is huge when you are thinking $300k house.. add $30k..
  • There are some registration-type fees with a new house, but there are also tax breaks. Make sure you’re clear on these.
  • Initial estimates sometimes don’t include heating! Wtf… ok add $20k for basic floor heating. They also include basic windows, floors, etc — some builders let you upgrade, some don’t!
  • Land prep is very expensive — if the land is not perfectly flat or didn’t have a house there previously that was just cleared, expect to pay for flattening, retaining walls, tree clearing, old house/concrete disposal, foundation supports, etc. An old house w/ concrete foundations may cost $50k to dispose, while raising/flattening can cost $20k just for a driveway on a 20% slope.
  • All upgrades are super expensive to the point if you do more than a few, you may want to go purely, custom builder.
  • External landscaping is really expensive, if you can wait or do it yourself it will save you a fortune.
  • Acquisition tax 3–5% — you will get hit with a land+building acquisition tax which comes later in the year — but make sure to budget for it. This is in addition to property tax, which to be honest isn’t that high in Japan (from what I’ve seen 0.2–0.5% of your purchase price, but this is based on rosenka/government land values etc).

Renovations & Caveats

I gave up on a new house because the 30–40m I thought it’d cost, turns out to be 50m+ after fees and taxes. Buying a “used” house includes sales tax at least!

So I went down the renovator path thinking I can buy a cheaper “used” one and put in 20m to make it like new. However, I learned a few things based on a 1 story 100sqm (30tsubo) house I was considering:

  • Full renovation might typically cost 15m for a 30tsubo house — or 500k / tsubo (about half a new build cost)
  • Full reno isn’t really a full reno — it might only include flooring, electric, plumbing, shower, toilet, bath, wallpaper and surface-level cleanups.
  • Septic tank replacement maybe another 2m
  • Roof lets say 3–4m with modest structural work
  • Floor heating can be 2–3m per large 20jo (35sqm) room
  • Windows can be 300k per large window (so think + 3m at least)
  • Exterior and Interior walls, like gutting and insulation or new window framing are a major cost (not sure, likely 3m + ?)

Add all this up, and you can easily spend between 20–30m on an old house to bring up to “to par” with a new house. The fine line of renovating vs rebuild is very fine indeed!

What To Do? New or Renovate?

Restoring an old house has a few advantages:

  • Don’t have to re-register if you don’t extend and stay within the foundation blueprint
  • Save some money on foundation and framing
  • Don’t need to comply to new zoning rules (if a concern)
  • A bit faster to build since it doesn’t require the licensed builders

Building new has a few advantages:

  • Newer earthquake safety compliance
  • Easier to re-sell since Japanese are very against old houses
  • Better insulation standards than 30yrs ago
  • Less money pit risk

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Doug Foo

Doug Foo

Tech Manager by Day, ML Hacker by Night — founder: foostack.ai

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