There are other options other than buying a foreclosed property. These options include:
1. Buying a used home on the market
2. Building a new home - whether a mansion, condo, or a stand-alone townhouse in the inner or outer suburbs of Tokyo (or other major city).
One option of buying a new home from a developer. I was out walking in the Adachi district of northern Tokyo the other day, reflecting on the appeal of this type of the proverbial stand-alone home.
It is fair to say that these villas might be construed as making sense for some people:
1. More storage than a strata property, both for cars, toys, other possessions.
2. Proximity to schools, nurseries and parks by virtue of the space for these facilities in the district. I.e. Proximity to a river flood plain makes particular sense given the sterilization of this land by flood restrictions for anything but flood mitigation and open spaces and sporting facilities.
3. Perception that wooden houses are safer structures than strata high rise structures. This is a question that depends on your comfort with modern engineering in the midst of earthquake events, and how that exposure might play out in terms of sustained asset prices. I would suggest that engineering standards have closed the gap. The question is whether the developer can be trusted to not take any short cuts.
4. More freedom for kids to roam, ride their bikes, and play safe. Perhaps there is more tolerance of noisy kids if this is the targeted market for the subdivision.
Of course such subdivisions have their disadvantages:
1. What is the point of paying for land value if there is no surplus land for you to develop?
2. What is the likelihood of your vertical strata space having value in future given the ubiquitous availability of it? There is one reason for hope, and that is a good location strategy that results in your community benefiting from a new rail line.
3. Isolation from the conveniences of the city, or even a regional city. There are of course levels of convenience. Can you ride home from the station? Will you otherwise have to pay for kids and family to travel concurrently to the city. In such cases, you are better off living near a regional city in a "modern" mansion, knowing the lifespan of older mansions is diminished by lower engineering standards.
4. The depreciation rate on new houses is very high. Marketing costs and manipulative sales strategies can see buyers pay too much compared to existing homes. It's not necessarily that home developers are ripping off the customer, but that the costs of a new building are high, and many non-discerning buyers are prepared to make emotional or haphazard "trusting" decisions upon the urging of sales driven companies.
You can buy a modern villa of 100m2 in land area and house floor area contained in a compact 2-storey house for around Yeq 390-420,000. These are very constructed homes with a lot of space. Not so comfortable given the smallness of rooms.
One of the reasons you might welcome a villa is foe the sun and breezes, but consider your window sizes and fly screen options. Consider that your neighbor's house might be as close as 0.5m away, reducing air flow and light to lower floor. Do you want any garden?
The problem with buying new is that the fresh paint smell doesn't last. The value of a new home will fall rapidly on purchase over the first 5 years. You might also suffer the result of poor neighbour's if their practices are evident. i.e. If they are untidy.
There are other important considerations though:
1. Are you buying on a good train line with respect to entertainment and shopping centres
2. Are personal connections served? You would hope to live there for 15 years if you are going to buy new, otherwise those early depreciation rates are going to be costly. Renting such a place is going to be costly in terms of depreciation too. Be sure to lock in a long term customer to fully realise that "new home" premium.
3. Is there scope for new train lines? A geospatial gap to fill? This creates upside for more lines and competition, which improve connections and stimulate population growth and development of services. Development is not equal. We need to make decisions that improve our odds of success.
4. Are the prices for rail reasonable? I bought on the Seibu Ikebukuro line because it's cheap. Some lines however are very expensive, like the Nippori Toneri Line. The price is a reflection of capital costs, competition, line length and the incomes of the market catchment.
There are two types of unwary people that buy villas:
1. Young families buying their first home
2. Older couples who are looking for a retirement home close to their children & families, or plausibly a better house on their local community. Often it's a preference to remain in their home town.