A few weeks ago we talked to the prefabricated home manufacturer Tama Home about their wares. We did so in the guise of a couple who is looking to build a house, which isn’t completely a lie because we have entertained that possibility for a number of years; but unless the salesman is really good, we never thought of buying a prefab home, which seems to be the preferred route for most Japanese people who start from scratch. Usually, these companies work with realtors and land development companies and sell homes through subdivisions, just the way they do it in the U.S. and other countries. The idea of prefab homes, meaning manufactured houses that are planned down to the last fixture, is that they’re cheaper, but once you factor in these companies’ adminstrative costs, overhead, and promotional expenses (Tama Homes uses SMAP’s Takuya Kimura in its ads) they can get pretty pricey.
In any event, once we toured a couple of models and listened to the safety spiel (Tama does have a pretty convincing countermeasure for land that is “soft” or subject to liquefaction) we had to get down to brass tacks, which is the matter of land. Obviously, there wasn’t going to be a sale of a house until there was a sale of a plot, and we admitted that we were “still looking.” No problem, because the salesman introduced us to a realtor who just happened to be in the office. He heard our story and our ridiculously low budget and then pulled out a book of land diagrams in the vicinity that might fit our financial terms. In the back of our minds, of course, there was no way we would be able to accommodate both the land and the house in our budget, and of course these two guys knew that (and knew that we knew that), but they kept making their pitches, which were soon veering off into the matter of loans, which we hadn’t talked about yet. The strategy was obvious, though: They would show us how easy it was to borrow money so that we wouldn’t have to worry about the tightness of our budget.
But there was another matter that came to our attention when looking at the lots being proposed. They were all joken lots, meaning they came with “conditions,” the main one being that if we bought them we would be obliged to build a Tama Home on them. Some of them happened to be in already developed subdivisions, but a few were on land that had yet to be properly prepared (meaning sewage, water, etc.). And we wondered later: If you actually bought the land and afterwards decided to use another housing company or builder, would it be illegal? A friend of ours who is an architect told us he didn’t think it would be, since once you had the title to the land you should be able to do anything with it that you want to do. We’re not sure, but considering how many vacant lots-for-sale have “joken” attached to them, it’s worth finding out.
The more I read your blog, the happier I am renting. Mind you, there are plenty of shady practices in Canada, where I am from; however, the system has more options, so not all of it is as rigged as in Japan. Not to mention, if you are wise and patient, you can buy in the bust of a cycle in Canada, and even if you must sell in another bust, you are not so poorly off. There is a rule of thumb that works quite well in N.America (and has kept us from buying). Take your rent and multiply it by twenty years: if your house will cost less than that it is worth buying; if not, better to rent and invest the extra money you have.
Japan… it doesn’t work like the fifteen-twenty year boom/bust cycle that Toronto has: demographically and financial, it is all down slope. The only thing I see in Japan’s favour is that borrowing is so much cheaper than in Canada, though your house is still going to be worth half what you paid when you sell at present (because ‘used’ houses are not saleable), and a quarter after twenty years (because Japanese land is still highly overvalued.
The way it works (I think) is that the agreement with the house builder is signed at the same time as the agreement with the land owner. You can get out if you want but there are penalties.