Tuesday, May 18, 2010

Land Cost as a proportion to Home Cost

So I should hear back about the loan by the end of the week or early next week at the latest. I had an additional form to fill out today for Life insurance. If I croak, my family is protected as the mortgage will be covered. This is included as part of the loan free of charge supposedly (more like hidden into the bank fees). But anyways... this is good insurance to have.

On a different note, buying land in Tokyo is not cheap. I'm now remembering a conversation with my wife about moving out further out into the boondocks like Tachikawa, Kunitachi, Hachioji, where land was cheaper. Setting aside the fact that I would not elongate my already daily lengthy commute, I thought it would be good idea to do some quick math.

Land-Home Ratio
According to neighbors and friends in Kichijoji 2/3 of the costs are related to the land and rest is for the house (TOP example . From looking at the land prices in Kunitachi the ratio changes to 1/2 for the land (BOTTOM example).

Taking into consideration the average life span of a japanese home (25 years) and making the assumption that: A- House value would equal ZERO in 25 years and B - land value would appreciate at 1.5% per annum I calculated the amount of I would end up losing due to depreciation. The quick math seemed to favor the home with higher land cost. With the top case I've only lost the a Toyota. With the bottom scenario I've lost a Porsche. Of course this is not extensive analysis as I have not factored in mortage interest costs or tax savings but it's a different perspective on things.

At the end of the day, anything is better than RENT!

No comments:

Post a Comment