One of the lesser known customs related to housing in Japan is the idea of owning a house on rented land. It’s less common today than it used to be but nevertheless common enough. Traditionally, leases on lots are about 50 years. A person can build a house on this land and have title to the structure, but the land is still owned by somebody else and the homeowner has to pay rent on it.
The main drawback, other than the rent itself, is that it’s difficult to pass a family home on to one’s children or grandchildren, since there’s no guarantee that the landowner will renew the lease. However, this drawback isn’t much of a problem in modern-day Japan since the majority of houses aren’t built to last more than thirty years, much less fifty. The chief merit of the system, if you want to call it that, is that homes sold not long after they are built on rented land tend to be much cheaper, for obvious reasons.
A lot of condominiums are built on rented land, which means all the condo-owners, whether they live on the ground floor or not, have to pay monthly rent. It’s usually easy to spot these situations. Condos that are built on rented land are usually cheaper than the market rate in a given area. For instance, this morning I saw a flyer advertising a 12-year-old condo located 12 minutes by foot from Machiya station in Tokyo. The size of the unit is 83 square meters and it costs ¥22.8 million, which is quite good for that area. The fine print revealed that the land is rented, and that the owner of this particular unit has to pay ¥14,000 a month to the landlord, in addition to the monthly management fee of ¥12,000 and a repair fee of ¥6,050.
Fortunately, the lease isn’t up until Heisei 61, so if you buy the unit you don’t have to worry about being kicked out of an apartment you own for another forty years. Meanwhile, taking into consideration that this building contains 227 units, I calculate that the landowner makes a cool ¥2 million a month, without having to spend any money at all in terms of upkeep. Just property taxes. Now that’s a racket.