Buying a house in Tokyo
Now that you have been living in Tokyo for some time, aren't you thinking of becoming a homeowner? Are you wondering whether foreigners can buy a house or an apartment in Japan? And how to get a loan? Are all visa holders eligible? Read on to find out everything you need to know about buying property in Tokyo.
Can expats buy property in Tokyo?
First of all, let's answer the most important question right away. Yes! Foreigners can buy a house, an apartment, or a plot of land in Tokyo. They can also sell their property, rent it out and pass it on as an heirloom. In fact, foreigners can conduct the same real estate transactions as Japanese citizens. They do not need to be a permanent resident. Actually, foreigners can sell, buy, or invest in property even as a non-resident.
You can therefore become the owner of your main home and/or invest in a second one. But make sure you comply with the law. Japan has responded to the Airbnb invasion, and the authorities have heeded the deep concerns of traditional hospitality professionals. Since 2018, rented accommodations have been subject to stricter rules, especially if they are located in tourist areas. In 2021, a new law will govern land use.
Also, be careful about taxes. You will be required to declare all income you derive from your rental activity to your tax authorities. If you pay all your taxes in Japan, then it will be the Japanese tax authorities. Otherwise, check if there is a bilateral agreement with your home country.
The law of June 15, 2018, on short-term rentals
The "minpaku" law refers to the practice of renting accommodation to tourists. Since 2018, property owners must register their property with the local authorities before making it available on rental platforms. The rental period must not exceed 180 nights per year and per accommodation unit.
However, each community has the power to tighten the rules. This is the case in the city of Kyoto or the district of Shinjuku, in Tokyo. There, “minpaku” is not allowed during the tourist season. Rentals are only permitted in residential areas and off-season. Other Tokyo districts have taken similar measures. In addition to the demands of the hotel industry, the municipalities have been sensitive to the discontent of local residents who reported cases of disturbances caused by noise and/or disrespect of rules. Some travelers were even considered by the residents as a source of nuisance.
So think twice before you buy a property to let. If you do not abide by the law, you risk a fine of 1 million yen.
The law of March 26, 2021, on the restriction of land use
In recent years, more and more foreigners are buying land in Hokkaido (Japan's northernmost island), and other outlying islands and islets. The matter has been brought to the attention of the Japanese government, as some of the purchases were close to Self-Defense Forces bases or nuclear power plants.
The law on land use restriction imposes a security perimeter of 1km around the so-called sensitive sites. The government can now obtain the contact information of any potential buyer and other specific information about their real estate project. It can revoke any deal it deems inappropriate. The government sees this as a measure of economic security, although it acknowledges that no incidents have yet occurred after a foreigner purchased land near a Self-Defense Forces base.
However, the geopolitical situation, especially with neighboring China, forces Japan to remain extremely vigilant. The Japanese government is considering restricting the possibility for foreigners to purchase real estate. The opposition fears that this would be an infringement of people's rights. Nothing has been decided yet.
The different types of houses available for purchase in Japan
Buying land with an unoccupied house in Japan
Japanese term "“akiya”" refers to empty houses. By the end of 2018, there were 8.46 million of them, or 13.5% of the total number of houses, as mentioned by Japan Times and Kyodo news agency figures. No region is spared, but abandoned houses are more numerous in Yamanashi prefecture (21.3%) and Wakayama prefecture (20.3%). Saitama and Okinawa Island have the lowest proportions of these ghost houses. Even if the phenomenon seems to be growing faster in rural areas, Tokyo is not spared, with 820,000 abandoned houses. The Japanese population is getting older, and COVID has only worsened the situation. Young people are massively moving into the big cities. It is also necessary to underline the exorbitant inheritance taxes that affect the heirs.
To revive these deserted territories, the government is slashing prices and distributing subsidies to attract young workers (especially families) back to rural areas. In 2019, the government proposed to give away empty houses or sell them for cheap. Because the growth of “akiya” leads to the desertion of other establishments like schools, shops, and services, entire districts are dying out.
What can be done to increase the value of unoccupied houses? In the year 2022, Kyoto wants to change its strategy and target the inheritors. The city is thinking of further taxing heirs who abandon their house or apartment. The local authorities have counted 100,000 empty heir-owned houses that are not available on the market. With only 2,000 empty houses available for sale, Kyoto authorities are considering additional taxes to force heirs to sell. The tax rate would depend on the age of the building, its location, and its surface area. It could go up to more than 500,000 yen for the most recent houses and could bring in between 800 and 900 million yen for the state coffers. If Kyoto were to adopt the measure, it would be the first municipality in Japan to apply heritage tax.
What are the procedures to buy an “akiya”?
If you want to buy an “akiya”, you will first need to find out in what year it was built. Homes built in the 1950s and 1970s were not designed to last. They only had a life expectancy of 20 to 30 years. The same is true for homes built in the 80s and 90s. Besides, it was not till 2005 that Japan announced a 3-year plan to eliminate asbestos. It took them longer to fully implement it. In fact, Japan was only successful at completely removing asbestos from its buildings in 2012. So, have the house appraised by a specialized agency to find out if it still has value, if it can be renovated, or if it is better to pull it down.
Generally, you will buy a piece of land on which there is an “akiya”. If the latter's value is low or non-existent (which is often the case), the agency will advise you to pull it down. The procedure is expensive. This is why many prospective homeowners prefer to buy a bare piece of land and have their house built on it.
Building your house
There are two options to build your house in Japan. You can either buy a bare plot of land or buy one with an “akiya” and pull the building down. In both cases, you will need to deal with a construction agency whose services are similar to those of an architectural firm. The agency will provide you with a tailor-made house — an ultra-personalized work that comes with a cost. Not surprisingly, getting a new house built from scratch is the most expensive option. The basic price is calculated according to the area in square meters, but one can also deal in tsubo, the traditional unit of area in Japan.
Buying an existing house
Buying an already-built house will generally cost you less. You will still need to call on the services of a real estate agency. You can opt for a newly built house or one that has already been lived in. These houses are less expensive than those bought on plan. However, in both cases, you will have far fewer options; these homes are not customizable.
Steps to follow when buying property in Tokyo
The information below is not only for Tokyo. It is applicable all over Japan.
Look for a real estate agency
To begin with, please note that selling from person to person is not part of Japanese culture. You will need a "fudosan", the Japanese term for real estate agent. The real estate agency is called "fudosanya" and, Suumo is their number one in Japan. But it is advised that you shop around and compare the various existing offers that might suit your needs and expectations.
Presenting your project to a real estate agency
Rather than buying and selling privately, Japanese people prefer the expertise of a real estate agency. This is also what we recommend, buying a house being no trivial matter. When hiring a real estate agency, make sure to have all the necessary information about the housing standards, the prices, and the legal aspects of the market. Moreover, property visits will be facilitated. The agency will also advise you on your situation and can even translate documents for you.
Contact your bank
Don't rush into anything, even if you have a crush on a property. Before visiting the house, contact your bank to draw up a financing plan. Will you get your loan? Even if you are a wealthy homeowner and are buying with cash, don't ignore your banker's advice.
Getting a home loan
Both non-residents and residents can buy a house in Tokyo, but the loan requires some solid guarantees. The first is the foreigner's residence status such as the visa type. The longer the residence permit in Japan, the better. If the permanent residence status is best for quickly securing a loan, the visa reserved for highly qualified talents is also highly regarded.
On the other hand, do not take the spouse visa for granted. If it allows you to work in Japan for an indefinite period of time, it is often not enough to satisfy the banks. They would rather go for a solid work visa.
The bank may also require proof of a permanent job, seniority, a good salary, bonuses, etc. However, it is no longer necessary to justify several years of seniority to secure a loan. One year in the company can sometimes be enough. Some professions are even better considered than others, especially doctors, lawyers, engineers, company directors, etc.
Typically, Japanese banks are quite reluctant to grant loans to foreigners due to the fear of payment failure, as it is for most countries. A Japanese national living abroad will also experience the same issues since a foreigner is often perceived as unprofitable and a potential liability. It is all up to you, then, to prove your financial reliability with a strong track record in order to secure a loan at a good rate. As a matter of fact, interest rates are quite low in Japan (between 0.1 and 5%), and your real estate agent will be able to assist you with your loan application.
Visiting your future property
Here's some useful vocabulary to begin with:
- Ikkodate (一戸建て): House
- Apa-to (アパ一ト): Apartment/ Flat
- Mansion (マンション): Condominium
- Fudôsanya : (不動産屋): Real estate agency
- Kenchikuka : (建築家): architect
- Tochi (土地): Plot of land
- Asbesto (アスベスト): Asbestos
- Madori (間取り): House plan
- Washitsu (和室): Japanese-style room
- Youshitsu (洋室): Western-style room
- Atamakin : (頭金): Down payment
Things to watch out for
Now that you've got your loan, you're ready to go for the house. Just as much as you might fancy a property, you also need to pay attention to its surroundings. Do your homework and explore the neighborhood:
- How is the environment like around there? Is it quiet or noisy?
- Are there any shops or any schools nearby?
- Are there any abandoned houses in the neighborhood? And if yes, how many are there?
- What about the transport service in this particular Japanese region (bus, subway, train)? How often do they commute?
- Is the neighborhood a friendly one?
- Are the people in the neighborhood old? Young? Or is it a mix of both?
Go on scouting by yourself. Visit the house, the neighborhood, and if possible, at different times of the day, when it comes to the neighborhood.
Closing the deal
The property acquisition process in Japan is similar to what you may experience in other countries. First, you need to contact your real estate agency and your bank. Once the loan is secured and your dream property has been identified, your bank will contact the real estate agency directly to transfer the funds to them. You will have to pay back your bank as per the terms and conditions agreed upon with them at the time of the loan application.
Generally, the agency fee will be 3% sales tax, and the down payment or deposit will be roughly around 10% of the property value, while other fees such as registration or property tax may also apply.
Required documents before signing a sales contract
To buy property in Tokyo or elsewhere in Japan will need your:
- Visa, resident card (“zaryu” card)
- Passport
- “Inkan” (the signature seal, engraved on an “Hanko”, which is a stamp)
And if you live outside Japan, you will be required to produce an affidavit in addition to your identity papers. This sworn declaration is a statement that you make before a notary to be exempted from taxes on assets that are already taxed in your home country.
Extra tips for buying property in Japan
Take the time to study the market and shop around real estate agencies. The whole process will be much easier for you if you speak Japanese. Even in this case, feel free to be accompanied by a Japanese contact person, as estate agents may still be a little hesitant to deal with foreigners who travels on their own. If you are not yet fluent in the language, your contact will be able to explain the technical terms to you.
Don't be surprised if some homeowners are reluctant to sell their property to you because of your nationality. Contact multilingual agencies like Wagaya Japan, Real Estate Japan, or Japan property. Be patient, persistent, and stay determined. The traditional agencies are gradually adapting to the multilingualism of the country, driven by societal changes.
Avoid going too much by the guts. Buying a house in Tokyo or Japan is not just another investment. If you choose an “akiya” (empty house), again, take the time to study the market. Don't just contemplate the low price.
If you fancy a Japanese style for a room (“washitsu”), consider the essential upkeeping of tatami mats, as it requires much more care than a parquet or a tile floor. A carpet is even easier to clean! Avoid placing heavy furniture on the tatami and for daily maintenance, opt for the broom or the vacuum cleaner.
Useful links (in Japanese, unless otherwise stated):
Suumo, the Japanese real estate giant
Leo Palace (in English, rental only)
Building your house
