Substantial Yen appreciation, Ultra-low interest rate, Housing loan tax breaks, and Freeze Consumption tax; Now, it is a chance to build a Western style house in Japan!
At the forst of this year many Japanese presidents in major company say that the prospects are bright. However, I suppose that we need time a little more to get such a feeling. Thus it is quite difficult to do such an expensive shopping like a house without hesitation in this situation. But, is it truth?
Foreign exchange profits from the Canadian dollar’s Depreciation
Exchange rate of Canadian dollar which we use as settlement currency has declined from 120 yen (end of year 2007) to around 82 yen (End of year 2010) against the yen during the past three years.
The imported construction material occupies about 30% of the whole construction expenses. For instance, 30 million yen house costs 10 million yen for the imported materials.
Then, let's think how much is the marginal profits by the difference of this exchange rate.
- Exchange rate 120 yen: $83,333.34 x 120 yen = 10,000,000 yen
- Exchange rate 75 yen: $83,333.34 x 82 yen = 6,833,334 yen
- Marginal profits of exchange is -3,166,667 yen
How do you think about these numbers? The cost has fallen as much as 3.17 million yen compared with the end of year 2007. Even only the point of this, you might be able to feel the advantage in which Western style housing is constructed now.
A decrease of payment by ultra-low interest rate
Next is; the amount of the payment has decreased by the ultra-low interest rate. The present interest rate of FLAT 35 (35 year fixed interest rate home loan by Mitsubishi Tokyo UFJ Bank) is 2.99%. The advantage of the 35 year fixed interest rate is easy to calculate the household economy within 35 years. However, it means will owe the risk that when the time of a low interest rate, fixed interest rate doesn’t fall the interest rate. JA bank has 3 year fixed floating interest rate home loan and the interest rate is 1.05%. The difference is 1.94%.
When use the 3 year fixed floating type home loan that is the lowest interest rate home loan; As Japanese economy is still hovering at a low level for these few years, the interest rate wouldn’t rise, too. Therefore, the repayment of home loan doesn’t cut into the family budget.
Some people want to choose long term fixed home loan, because future is not decided. However there is no meaning to choose higher interest rate home loan. Look at the repayment simulation below. You can find out which type is better.
Precondition
- Price for house building: 30 million yen
- Amount of Housing Loan: 25 million yen (5 million yen prepared own money)
- The payment period of the loans is 35 years, to be paid on a monthly basis
For FLAT 35 of all period fixed interest rate: 2.99%
- Monthly payment: 96,072 yen
- Total Repayment including interest: 40,350,361 yen
For JA bank of the 3 year fixed floating interest rate : 1.05%
- Monthly payment: 71,155 yen
- Total Repayment including interest: 29,885,275 yen
The Difference
- Monthly payment: -24,917 yen
- Total amount of repayment including interest: -10,465,086 yen
If the interest rate differs 1.94％, difference of the total amount is 10.4 million yen or more. You can own BMW, and also you may use for children’s tuition fund with that 10.4 million yen. Even I tell you this; you are still wondering that the floating rate involves risks when the interest rate rises. Of course, it’s also true. However, if the interest rate has kept low range, you will get benefit from it.
Moreover, how to rise the interest rate? It’s influenced by GDP, and generally the rise of GDP is following the rise of population.
Can you expect high growth of economy in these years that the time of Less children and aging populations in Japan? Do you think business is picking up, rise the salary, and rise interest rate? If you have fixed income, it would be a big chance to build a house. Because when economy is sluggish, land becomes cheap and prices fall, too. Therefore architectural materials become cheap, too. So, better quality natural material can be used. Now, the interest rate is a low level and it is a chance to build a house. Let's change the pinch to the chance.
Great preferential tax breaks for buyers of residential houses in fiscal year 2011
The content on preferential tax breaks for buyers of residential houses had been being decided for one year as a temporary statute of the limit. 6 million yen or less will be subtracted from the income tax for ten years at the time of building and it returns. The amount of money of 10% of energy saving and barrier-free construction returns from the income tax in the fiscal year at extension and renovation.
When the house of 30 million yen is constructed with building, it becomes the following.
Housing loans to be deducted:
- Construction expenses 30 million yen－Own money 5 million yen = 25 million yen
- Deduction total: 25 million yen x 1.0% x 10 year = 2.5 million yen
4 million yen of the highest amount returns when the target housing loans for the deduction are 40 million yen or more. We will recommend to use low interest rate financings as much as you can instead of using funds on hand, and to be received. If you want to know the details, please check Summary of preferential tax reduction for housing (Japanese) in Ministry of Finance, Japan.
The consumption tax will be scheduled to go up near future.
As you know already, the government is suggesting the consumption tax improvement near future. The consumption tax hangs to the building though the consumption tax doesn't hang in land. It's uncertain how much percent will be rise, a lot of intelligent peoples seem to be making it to the standard of 10 %'s one though. In that case, how does the paid consumption tax become it? Let's simulate it.
- Consumption tax 5% 30,000,000 yen x 5% ＝ 1,500,000 yen
- Consumption tax 10% 30,000,000 yen x 10% ＝ 3,000,000 yen
- Difference of payment; + 1,500,000 yen
This simulation assumes the consumption tax to be 10%. However, please remind that a tax rate might go up more to supplement an enormous fiscal expenditure of the economic measure.
Add all of these differences, Total Expense decrease about 17.6 million yen. Now is a Chance!
How do you think now? Do you understand time of now had not to be missed if you wanted to build Western style house? Of course, it is not necessary to think about the residence forcibly. However, it is now to put the dream into practice if you want to realize your dream in the near future.
The ordinary house builder has made the mechanism rebuilding it at the cycle of 20 years or more so far in Japan. If could be stopped the house-building of such a consumption type, and try to build a house of the 100 years or more durability, universal and beautiful design like the brick cladding wall, the next generation of you can maintain it at a little cost, and gets to the purchase such as villas and boats with the remaining money. In a word, doing the house-building of the property accumulation type becomes a trend in the future. I think that it is genuine Western style housing can do it. Therefore, money of corresponding is also necessary. Meeting a wonderful architectural partner and timing are important. In the time of recession, use good quality things for long time. Did you bought the one only of cheapness.
We are executing a tour to watch building materials and furniture in Canada. Now is a chance to shopping because Japanese yen is still strong.
The sightseeing in Niagara and Toronto would become good memories of your life. Why don’t you decide to build strong and fashionable Western style house in this chance with us. The consultation of construction and the design is click here.
By Yuzo Murase, Architectural Consultant, January 8th, 2011
