2016-05-20

Advantages and disadvantages of buying a house that cannot be rebuilt

Advice

There are some houses that appear to be a cheaper price on the market than the market average price. This likely because these are houses that cannot legally be rebuilt or redeveloped under the construction laws such as the Building Standards Act and the City Planning Act in Japan. These types of properties are called “再建築不可 (saikenchiku fuka),” which translates to “reconstruction is not allowed.”

According to the Building Standards Act, for a main road that is at least four meters wide, the property must contact the road at a distance of at least two meters in width. If the width of distance from the main road is less than two meters or does not exist, the property would be considered as illegally built and cannot be rebuilt.

Advantages of buying a house that cannot be rebuilt

Low prices
Low land values reduce fixed asset tax and inheritance tax
You cannot rebuild but you can renovate
Rent out at higher prices (if you renovate it)

Disadvantages of buying a house that cannot be rebuilt

It is more difficult to receive loans from the majority of banks
It is difficult to sell it in the future
The pathway is too narrow to access by a car

Although there are some disadvantages of buying a house that cannot be rebuild, a big advantage is the reduced price of a non-rebuildable property. Because the buildings are also older, it would probably be best to finance renovations so if you should choose to rent out the property you can do so at a higher price.

If you consider buying non-rebuildable properties, you should look for:

whether the building structure is strong — this is important to know because the property cannot be rebuilt
whether you get much sunlight
whether it located in a prime location, particularly if you consider availing it for rent

If you are looking for a house that you are going to live permanently, these types of houses might be good for an investment because you eliminate the possibility of selling it out.

If you have any questions or would like to arrange a viewing, please feel free to contact us!