We get a lot of flyers in our mailbox for condominium and new house sales in the vicinity. One caught my eye yesterday. It was for a small housing development near Machiya station on the Chiyoda subway line and the going prices were between ¥29 and ¥32 million for single family houses of about 100 square meters, which is pretty chaep for that area of Tokyo.
The fine print revealed why: that’s only for the structure. The land on which the structures will stand (they haven’t been built yet) will be rented. This isn’t particularly unusual. A lot of people own houses and even condominiums but not the land under them. However, the fine print also said something about a “20-year law.” My experience has told me that leases for land in this sort of circumstance are usually about 50 years, but these houses haven’t even been built yet. Does that mean the potential home owner only gets a 20-year lease? It doesn’t sound very secure and, in fact, makes no sense considering that the ad also points out that potential buyers are eligible for the government’s Flat 35 mortgage guarantee program.
A bit more research revealed two things. One is that the law referred to is probably the one that states, depending on the type of building, buyers of newly built homes who rent land are entitled to a 30-year lease renewable thereafter for successive 20-year periods. Apparently, property owners cannot just kick you off the land once your lease is up. Considering that homes are only built to last about 30 years in Japan such a rule may not be necessary, though it sure seems as if it would put a damper on home sales. The other thing I found out is that real estate people rarely talk about this law and don’t seem to know too much about it.
In any case, the rent of the land under the houses that will be built in Machiya is about ¥500 per 3.3 square meters per month, which I calculate comes to about ¥15,000 a month for each plot of land. That’s about the same as you’d pay in property taxes if you actually owned the land. But, of course, you don’t.