Buying Real Estate in Japan: Can Foreigners Own Properties in Japan?

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Renting an apartment in Tokyo is already financially draining, let alone buying land or property in Japan. Even non-Tokyoites know the average land price in Japan is notoriously high — and it’s showing no signs of slowing down. In 2020, the land price in the metropolis aggressively climbed to 1.12 million yen per square meter from its previous 1.07 million yen. So what’s the whole buzz about owning a property and buying real estate in Japan?

The fact remains that a piece of land generally increases in value, be it in the rural outskirts of Saitama or in the tumbledown streets of Tokyo. You can earn a steady passive income by developing the property in Japan and putting on a lease, or you can chill it until it grows in value. It’s a great strategic move for foreigners to diversify their portfolios and have peace of mind — a financial cushion in the bizarre case business rolls downhill and you’re laid off in Japan.

Can foreigners buy real estate in Japan?

Yes and yes to both — you can buy real estate in Japan.

Let’s clarify it one more time: You can buy land or property in Japan and be the absolute owner of it. The legal concept is something unique to the country and, apparently, advantageous to foreigners.

Some countries like England and Hong Kong adopt a leasehold and freehold system. When you invest in, say, a land there, you will only hold ownership to it for a certain period (99 to 125 years). In Japan? The land is all yours permanently, no government interventions, the expiration date on proprietary rights, hidden red tapes and whatsoever.

You can buy a property in Japan and be the absolute owner of it.

All foreigners are permitted to buy land and buildings in Japan. The government overrules restrictions. When it comes to resident status, nationality and visa types, the Japanese real estate industry does not discriminate. The tax you have to pay for land purchase will also be the same as the rate paid by any Japanese citizen.

The only catch is that there are regulations related to national security concerns. A 2017 report from the Forestry Agency reported that approximately thousands of hectares of forest were bought by foreigners in Hokkaido, most of them bought by Hong Kong, Taiwan and Singapore investors. The land is allegedly meant for resort areas development, but the precise strategic value of the location triggers concerns among the Japanese officials — so much that they prepared drafted legislation for the public.

Before purchasing a property in Japan

Financial Plan

The market may be open to everyone, but you might not be open to the market. Sure, you don’t need to hire a land specialist to purchase land and property in Japan, but you need a solid financial plan. You need to know the breakdown of the overall expenses you will bear for buying real estate.

If you are unconfident with managing property tax alone, it is always a good idea to hire a foreign-friendly tax accountant.

Here is an overall estimation that you can use to budget your real estate purchase:

Cost of propertyThe actual price of the property is the one number you see when you are browsing.
Stamp duty (Japanese government processing fee)It is the fee you pay to the local offices for making the sales and loan agreement. It looks like a stamp, and you can purchase it at the post offices or convenience stores.
InsuranceFire, earthquake and etc. Any insurance you can think of.
Property taxJapanese property tax is 1.4% of your asset value. In your first year, you will pay (days left this year/360) as a percentage of the amount of the tax.
City planning taxJapanese city planning tax is 0.3% of your asset value. In your first year, you will pay (days left this year/360) as a percentage of the amount of the tax.
Property and land registration taxFrom April 1, 2021, the Japanese property registration tax and registration of land ownership is 2% of your asset value.
Real estate acquisition taxJapanese real estate acquisition tax is 3% of your asset value.
Broker commissionDepends on your brokerage
Judicial scrivener feeWhen you file your property registration, a fee will incur by a judicial scrivener
Optional: LoanProcessing fee, commission fee, and the property registration tax will change due to your loan

In conclusion, you can expect your purchasing value plus 6-10% of your property price.

Overwhelmed with the math and numbers? You can also use this real estate tax calculator tool.

buying real estate japan

Loans in Japan

If you are going to pay the entire fee upfront, then you can skip this. However, unlike a small group of moguls, most of us would need to apply for a mortgage and pay it off in a long period.

Foreigners can only get a loan in Japan if they are either permanent residents or working for a major corporate. Even if you fulfill these requirements, there are still difficulties depending on the loan company. Some companies might be more rigorous in their processes depending on the amount a foreigner wants to loan. They can conduct examinations, take a look at your residency in Japan and check your income sources before placing down the loans.

Real estate transaction in Japan

Real estate transactions are usually done via a real estate company or broker. Purchasing a property in Japan is also no easy feat. You’ll be dealing with tedious and difficult procedures, navigate the contents of your contract and understand the legal framework behind buying real estate. All these delicate issues mean you can’t have a margin for error and misunderstandings. With hardly any documents written in English, you have to make sure to partner with a great foreign-friendly or bilingual realtor.

Some of Japan’s leading real estate companies are:

Property viewing in Japan

So you’ve got your eyes hooked on that land area — the last thing you’d want is to judge the property through the pixels and make the wrong choice because of your headless decision. This is viewing the property takes center stage. Contact your chosen realtor and ask for a property viewing. It’s a great way to observe the actual environment of the property and solidify your gut feeling.

When viewing a property, you’re provided with on-site information you would’ve missed from the listing. You can inspect details that might either be a deal-breaker or decider: good air ventilation, noisy neighborhood or sloped floors.

Sending you bid for buying real estate in Japan

After you make an offer, you can then submit a Letter of Intent. Here, you need to explain briefly why would you like to make a purchase. If the seller is interested, you guys will have a meeting to go through all the conditions and requirements by law — with your realtor guiding throughout the way.

The realtor will explain a document named Statement of Important Matters. As the name states, this paper includes everything that is important to the buyer. For example, it covers topics on abandoned property in the case homeless people are living there. Your certified realtor then continues to discuss legal details, including title registration, ownership right, legal description and payment methods.

Contract for buying real estate in Japan

After you review everything and would like to proceed, you and the seller need to sign the sale agreement and make a down payment. Your realtor can also negotiate the terms and conditions of the property on your behalf before moving on to the contract procedure in Japan.

The agreement states the obligations for both parties. This ensures a safe and legal binding of the coming transaction. Upon failure to fulfill these obligations, the failing side may be penalized, so make sure you are fully committed before signing this.

You may need the following document to sign this contract if you are a foreign resident in Japan:

  • Registered hanko (seal)
  • Certification of your hanko
  • Zairyu card (residence card)
  • Proof of identification (including passport and driver’s license)
  • Down payment

For non-residents or foreigners in Japan who don’t hold residency status, you will need:

  • Affidavit (written statement from an individual which is sworn to be true)
  • Identification document

Owning the real estate in Japan

Finalizing the transaction for buying real estate

The transaction may be in whatever form, but in the end, you also need to settle the tax and get the recipient of documents.

You may need to pay some or all the following.

  • The outstanding balance of any broker and/or judicial scrivener you hired
  • Registration fee
  • Local city planning tac
  • Property management fees
  • Property tax
  • Fees relate to mortgage loans
  • Any other fee from your contract obligation and Japanese law

After settling everything above, you will hand all the papers to a judicial scrivener, who will help you with transferring ownership title registration.

Only when all the materials are verified and payments, including brokerage commission and other service fees, are completed can they deliver the keys to you.

What happens after you buy a property in Japan?

A good question that most people tend to overlook. Once you’ve settled your real estate payments, finalize the purchase and officially own a property, you must pay Fixed Asst Tax and City Planning Tax every year. If you are residing outside Japan, you can appoint a tax agent to complete this yearly obligation on your behalf.

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