Thursday, March 22, 2007

From "Scrap and Build" to "Revitalize and Renovate"

When I talk to our Japanese associates, they are always interested to learn that in North America buildings actually increase in value with age. In Japan the "scrap and build" mentality has ruled the real estate industry for years. A house`s life span is a max of 20 to 30 years,so when they speak of property they actually mean the land.

Recently with the stagnate economy many young people can`t afford to build their own home. Outside of major city areas housing prices can start at $500,000 to buy land and build a house,the land price being the larger portion of that figure. More and more young families are starting to buy resale homes. Instead of facing 35 year mortgages for a house that may not outlast the mortgage they buy properties renovated to modern standards.

The only problem for this resale market to take off is the high taxes investors face if they buy and sell investment properties - up to 50% of the profits.

It is interesting to watch the changing market as it shifts to accomodate the next generation.

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