Why does buying in Japan not always build wealth?

Japanese buildings depreciate sharply — a wooden house is often treated as worthless after about 22 years for tax purposes, and even concrete apartments lose value. Land can hold or rise in central cities but fall in shrinking regions. Unlike many countries, Japanese property is frequently a depreciating asset, so buying is not automatically better than renting.

What costs does owning add beyond the mortgage?

Owners pay an annual fixed asset tax and city planning tax of roughly 1.4 to 1.7 percent of assessed value, plus building management and repair reserve fees on apartments, and one-off acquisition taxes and agent fees on purchase. This tool rolls these into an annual holding-cost rate and upfront purchase costs.

How does the invested deposit factor in?

If you rent, the money you would have used as a deposit and purchase costs can be invested instead. The tool grows that lump sum at the return rate you set, then credits it to the renting side. This is the opportunity cost of tying up capital in a home, which a fair comparison must include.

What appreciation rate should I assume for Japan?

Be conservative. Tokyo and other major-city central districts have seen modest gains, but nationally Japanese residential property has often been flat or declining for decades. Many analysts use 0 percent or a small negative figure for buildings. Enter a rate that reflects the specific city and property type you are considering.

Does a longer stay favour buying?

Usually yes, because the large one-off purchase costs are spread over more years and rent inflation compounds against the renter. But in Japan, building depreciation works against the owner the longer they hold a structure, so the break-even is less clear-cut than in markets with appreciating homes. Run several horizons to see the crossover.

Japan Rent vs Buy Calculator

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In many countries buying beats renting over time, but Japan is different: buildings depreciate, and property is often a wasting asset rather than a store of wealth. This calculator models the full financial picture — mortgage, purchase taxes, holding costs, resale value, and the return on an invested deposit — so you can compare renting and buying honestly over your horizon.

How it works

The two paths are tallied over your chosen number of years:

rent path  = total rent paid (with annual inflation)
           − investment growth on the deposit + purchase costs
buy path   = mortgage payments + purchase costs + holding costs
           − net resale value (price grown by appreciation, minus loan balance)

The cheaper net total wins. Holding costs combine property tax, management, and repair reserves; appreciation can be negative to reflect Japanese building depreciation. The deposit you would have paid is invested on the renting side as its opportunity cost.

Example and notes

Renting a 150,000 yen-per-month flat for ten years costs around 18 million yen before any rent rises. Buying a 50,000,000 yen equivalent with a 10,000,000 yen deposit at 1.8 percent, with 0 percent appreciation and a 1.5 percent annual holding cost, can end up more expensive once purchase taxes and depreciation are counted — which is why so many Tokyo professionals rent. Try a positive appreciation for a central-city land-heavy property and a negative one for an old wooden house to see how sharply the answer swings.