29 Aug Should I rent or buy in Tokyo? A financial comparison

After spending some time living in Tokyo, it’s natural to start thinking about the possibility of buying a place rather than continuing to rent. It’s a personal decision that many of us face—whether it’s the thought of owning your own space, building something more permanent, or just wondering if renting still makes sense. At apts.jp, we get it. We’re here to help you consider what’s best for you, based on your life in Japan, your plans, and what you really want from your Tokyo experience.

The big difference in buying vs renting in Tokyo

The biggest difference between renting and buying in Tokyo boils down to ownership. When you rent, you’re paying for a place to live, but it will never be yours, no matter how long you stay. Renting gives you flexibility, but there’s no long-term financial payoff—you’re essentially paying for a roof over your head each month without building any equity. You are losing money.

On the flip side, buying a property in Tokyo means you’re investing in something that could increase in value over time. Even though buildings in Japan tend to depreciate, the land and the property itself can still become valuable assets, adding to your financial future.
In Tokyo’s real estate market, this difference is crucial. Renting is often more straightforward and flexible, especially for expats or those unsure about their long-term plans. But buying gives you a chance to build equity, benefit from potential property appreciation, and secure a stable home that’s truly yours. The choice between renting and buying should come down to your financial goals, lifestyle, and how long you see yourself staying in the city.

The case for buying in Tokyo

1. Financial investment

• In Tokyo, especially in popular neighborhoods, buying property often means your land could increase in value over time. This makes it a strong investment, particularly if you’re planning to stay for the long haul.
• Long-term savings: Thanks to Japan’s low-interest rates, your monthly mortgage payment might actually be lower than what you’d spend on rent, leading to substantial savings over the years.

2. Lifestyle benefits

• Freedom: When you own your home, you literally have the freedom to make it yours. You can renovate, customize, and design your space exactly how you want, without needing to get a landlord’s approval.
• Stability and security: Owning a home gives you peace of mind. You’re not subject to a landlord’s decisions, so there’s no need to stress about rent increases, lease renewals, or sudden relocations.

3. Financial considerations

• Owning property in Japan can come with some tax advantages, such as deductions on mortgage interest and property depreciation, which can help lower your overall tax bill.
• Insurance and inheritance: With proper insurance, your property becomes a protected asset for your family, providing a level of security and peace of mind that renting just can’t offer.

The case for renting in Tokyo

1. Flexibility

• Ease of movement: Renting makes it easy to relocate whenever you need to, whether it’s for a new job, a lifestyle change, or just the desire to explore a different neighborhood. It just costs money with all the related fees, like moving out before your contract ends etc.
• Adaptability: If your financial situation changes, renting gives you the ability to adjust quickly, like downsizing or moving to a more affordable area without the long-term commitment of owning a property.

2. Lower upfront costs

• Initial financial outlay: Renting usually requires much less money upfront compared to buying a home, making it a good option if you’re not ready for a big down payment.
• No maintenance responsibility: When you rent, the landlord handles most of the maintenance and repairs, which saves you both time and money.

3. Renting in practice

• Stability concerns: While renting offers flexibility, it also comes with some uncertainty. You might face challenges with lease renewals, potential rent hikes, or the possibility of needing to move if your landlord decides to sell the property.
• Challenges for expats: Renting as a foreigner in Japan can sometimes be tricky, with fewer options and potential obstacles to overcome. Especially regarding different Visa types. At apts.jp, we’re here to guide you through the entire process, making it as smooth as possible from start to finish.

1. Buying scenario

• Purchase price: Imagine you buy a property for ¥40,000,000 with a 2.5% interest rate (fixed interest rate) on a 35-year mortgage.
• Monthly costs: Your monthly mortgage might be around ¥108,000, with additional expenses for taxes, maintenance, and insurance. Over 20 years, your total outlay could be about ¥34,000,000.
• Resale value: With modest appreciation, your property could be worth ¥45,000,000 after 20 years, potentially making your investment worthwhile.

2. Renting scenario

• Monthly rent: Renting a similar property might cost ¥150,000 per month. Over 20 years, you would spend approximately ¥36,000,000 on rent alone.
• No equity building: Unlike buying, renting doesn’t contribute to your financial future—once the money is spent, it’s gone.
• Analysis: While renting might seem cheaper initially, buying can offer more financial stability and security over 15-20 years, especially if property values appreciate.

Personal Considerations

1. Lifestyle needs

• Family planning: If you’re planning to start or grow your family, owning a home offers stability and room to expand. Renting, on the other hand, provides flexibility if your plans are still evolving.
• Cultural and social factors: In Japan, owning property can enhance your social standing and even improve your visa prospects, making it an attractive option for long-term residents.

2. Risk management

• Market risks: While property values in Tokyo have generally been rising, there’s always a risk they could fall. Renting mitigates this risk since you’re not tied to a long-term investment.
• Economic stability: Your job security and the broader economic environment play crucial roles in deciding whether to buy or rent. Low-interest rates make buying more attractive, but economic fluctuations could impact property values.

Making the decision

• Job stability: How secure is your current job, and how long do you plan to stay in Tokyo?
• Family plans: Are you planning to start or expand your family? Do you need a stable environment for them?
• Financial goals: Are you focused on long-term savings and investment, or do you prioritize flexibility and lower short-term costs?
• Lifestyle preferences: Do you prefer the freedom to move easily, or are you ready to settle down and customize your living space?

Expert advice for buying vs renting in Tokyo

Deciding between renting and buying in Tokyo can be daunting, with so many factors to consider. That’s where we at apts.jp come in. We’re not just here to show you properties—we’re here to listen, understand your needs, and offer advice tailored to your unique situation. Whether you’re leaning towards renting for its flexibility or buying as a long-term investment, our team is here to guide you every step of the way, ensuring you feel confident and supported in your decision. Let’s work together to find your perfect place.

Conclusion

Deciding whether to rent or buy in Tokyo isn’t just about the numbers—it’s about the life you want to build here. Both options have their benefits, and the best choice depends on your lifestyle, financial goals, and how long you plan to stay. Whether you’re attracted to the flexibility of renting or the stability of owning, making an informed decision will help you create the life you envision in this amazing city.

At apts.jp, we’re here to support you through every step of your Tokyo journey—whether that’s finding the ideal rental or helping you navigate the buying process. Reach out to us, and let’s make Tokyo feel like home to you.