Buying Property in Japan
As part of the property guides here at Expat Network, we present this guide for expats and other foreigners interested in buying Japanese property.
Japanese Real Estate Market Overview
Japan is generally seen as a good place for real estate purchase and investment. Japan has a long history as a safe, orderly country. Japanese lawyers can create contracts that can be enforced. There is a solid legal system, with low corruption, and relatively few geo-political conflicts. Strong demand from foreign buyers is another sign of international confidence in the Japanese real estate market.
“You can count on a good supply of viable properties, get a high yield on your investment, and depend on the rule of law to guard that investment.”
— Toshihiko Yamamoto, Real Estate Advisor
There is also no prohibition on foreigners owning land in Japan. It is not necessarily easy to buy and sell property in Japan as a foreigner, but it is perfectly legal.
In addition, recent trends as of 2023 show real estate values beginning to appreciate (after negative or stagnant values that followed the Land Bubble of the late 1980s). The major metropolitan areas of Tokyo, Osaka, and Nagoya (and several up-and-coming regional cities like Sapporo and Fukuoka) have strong demand and rising property values.
Primary Considerations Before Buying Property in Japan
As you begin the process of buying Japanese property, you should keep four basic questions in mind: What is your timeline to make a purchase? What is the location of the property (city, etc) you want to buy? What is the approximate budget for the purchase? And what is the source of the funding for the purchase.
Expats in Japan that show they are prepared to answer these basic questions will have an easier time working with Japanese professionals and will move through the real estate process more successfully.
Resources for Foreigners Buying Property in Japan
While the life situation of each expat will be different, there is a basic team of professionals that will help a foreigner buy real estate in Japan. Three types of professionals are particularly helpful: a lawyer to help with immigration, visa issues, or company formation, a real estate agent, and a tax professional.
Depending on your situation, some combination of those experts may help you navigate the process of buying Japanese property. Of the three, having your own real estate agent is probably the easiest and the most essential. A good agent can often introduce you to lawyers, accountants, and other professionals that can help with real estate transactions.
Visa Status
To buy property in Japan, you do not need to be a citizen of Japan or have permanent residency. You can even buy property without ever entering the country.
It is always advisable to visit the property before you buy, and depending on your country of origin, you could obtain a tourist visa which would allow you to stay in Japan for several weeks, meet with real estate agents, set up a company (if necessary), and look at property for sale. Expats from the United States (for instance) are typically allowed a 90-day tourist visa.
Having a long-term visa can be helpful for practical reasons, giving you time to explore locations, to decide what kind of property you want, and to find business partners you trust. Long-term visas (such as a working visa or a spousal visa) can also make it possible to find a loan or to open a bank account.
Buying property in Japan does not make you eligible for residency. However, if you owned a lot of property in Japan, via a Japanese company (that employs you), and that company created consistent profit (via rental units, etc), that could be the basis for a business visa that could turn into permanent residency over time.
Source of Financing
Being clear about the source of your funds will make the transaction easier to complete. All-cash purchases are the easiest, and will make the likelihood of completing the transaction much more likely. Real estate loans for expats living in Japan are not common, but are sometimes feasible.
Property Loans in Japan
There are some opportunities for property loans for foreigners in Japan, even if they are rare and can be difficult to obtain.
Expats that have lived in Japan for several years, that have a working visa and are employed by major company, do have some options for borrowing money to buy property in Japan. Without a spousal visa or long-term residency in Japan, loans would be much more difficult, but sometimes possible for when certain conditions are met; like high-income borrowers, with strong deposits, buying low-risk property in established markets.
For many expats, it is easier to obtain a loan in your country of origin (based on local income and tax records in your home country, or using property in your home country as collateral for the loan), and then to bring that borrowed capital to Japan and pay for the deal in cash.
There are some local Asian countries that will occasionally approve loans for their citizens that want to buy property in Japan. For expats from Singapore and Hong Kong that want a loan to buy Japanese property in major markets like Tokyo, that may be a viable strategy.
Real Estate Agents in Japan
For both buyers and sellers, working with your own real estate agent is strongly encouraged. As a buyer, you are advised to seek out a local Japanese agent to represent you before you speak directly to any agents representing property for sale (more about this below in the section on Dual Agency).
While most agents in Japan speak only Japanese, many major cities have agents that speak multiple languages and can help you in your native language. While finding an agent you like is not an easy process, doing business in English, Mandarin Chinese, or Korean (and other languages) may be possible. There are sometimes referral services that can help you find agents that speak your language. And there are also third-party real estate consultants that will (for an additional commission) help expats to work with the Japanese to complete a transaction.
As you begin to work with a Japanese real estate agent, they will want to know your timing for purchase, your budget, the general location of the property you want to buy, and the source of funds for that property.
Agents in Japan do not typically ask buyers for any formal commitment or contract. You are allowed to talk to more than one agent as a buyer (and in some cases as the seller), but once real work begins, it is customary (and polite) to stay with one agent for a given transaction in a given market.
Commissions on Real Estate Transactions in Japan
Generally speaking, commissions paid on real estate transactions are 6% of the purchase price, with 3% from the buyer and 3% from the seller. It is possible that only one agent will try to represent both sides of the transaction (see Dual Agency below), but that agent will generally expect to collect both sides of the commission.
There is some opportunity to negotiate the commission with your real estate agent. For lower-priced deals, expect to pay the full commission. For larger deals, a reduced commission of ~2% may be possible. It is always advisable to negotiate any commissions in advance.
Dual Agency in Japan
The practice of dual agency deserves some mention, as it is a common occurrence in Japan.
Sometimes a real estate agent will attempt to represent both the buyer and the seller. This creates a conflict of interest, as the agent is incentivized to complete the transaction (to earn both sides of the commission), and could downplay any problems on one side of the deal or the other.
For example, an agent might show property to a buyer that is represented by that agent’s company, and ignore other available property on the market that might be more suitable or available at a better rate.
As a buyer, if you first engage your own agent, and then, have your agent contact the seller’s agent for any property you are interested in, you can avoid problems of dual agency.
Japanese Property Listing
Once you have an agent, that agent will discuss your budget with you, your needs for the property, and can then recommend various property for sale in Japan.
Typically speaking, most property in Japan is listed on a government-run service called REINS. Only licensed real estate agents in Japan have access to REINS.
In addition, there are several online property listing websites in Japan. Some of these are third-party websites, and some are run by specific real estate companies in Japan.
It is generally advisable to find an agent that will represent you as the buyer, that may show you their own property listings, but will certainly consider property available on REINS as well.
Making an Offer
After you have had time to evaluate several properties online, and to see the properties you like in person, you might be ready to make an offer. Your agent can help you make an offer to buy property, and can work with the seller’s agent to have that offer received and to request a response.
Negotiation
In Japan it is common to negotiate the purchase price for real estate. This is true for residential and commercial property. Your agent can give you guidance on a range of prices that might be acceptable.
Explanation of Important Matters and the Deposit
As you and the seller have agreed on a price and your offer is accepted, you will be ready to further commit to the purchase.
At a meeting with your agent and a real estate lawyer called a judicial scrivener, a document called the “Explanation of Important Matters” will be read to you by your agent. This document will include a review of many topics, including any liens on the property, any issues with property boundaries (or private roads), details about renters, building management fees and cash reserves, any disclosures about the structure, etc. After you feel you understand those issues, you will be asked to sign that document as part of the transaction process.
Along with some other small fees, you will also pay your deposit on the property, which is usually 5%-10% of the purchase price.
The final payment of the remainder of the purchase price, along with fees paid to the local government, to the agents, and to any lawyers involved in the transaction, are all paid on the day the transaction is finalized.
Wire Transfers for Real Estate Transactions in Japan
The Japanese do not use checks, and all the money for buying or selling real estate in Japan is done via wire transfer. There is also no “escrow” company, so money for real estate is often wired to and from the bank accounts of the real estate agents, or sometimes using the bank account of a judicial scrivener involved in the transaction.
Judicial Scrivener
Judicial scriveners serve several functions in real estate transactions in Japan.
Unlike some countries like the United States, there no “escrow” company (or title company) that serves as an intermediary (and a notary) for real estate transactions. On the day the purchase is to complete, there is a meeting with the buyer, the buyer’s agent, the seller’s agent (but usually not the seller), bank representatives (if there is a loan), and at least one judicial scrivener to record the transaction, and to make any required documentation with the local government as to ownership of the property.
Transaction Fees
The total fees for the purchase of real estate in Japan are generally 5 to 7% (in addition to the purchase price). The commission paid to the agent from the buyer is approximately 3% of the purchase price, and is typically the largest single aspect of the closing cost.
There are additional costs and fees associated with buying Japanese property, including the real estate acquisition tax and ongoing property taxes.
Real Estate Acquisition Tax
Unlike some countries, expats buying property in Japan should expect something like a “sales tax” as they buy property, which in Japan is called the real estate acquisition tax. This tax is an additional tax related to the purchase, but is issued by the local government, and comes some months after the purchase.
The real estate acquisition tax is roughly an additional 1% of the purchase price. It is based on the “assessed value” of the property (which is some number that is generally lower than the purchase price and is determined by the local government).
The bill for the real estate acquisition tax will arrive to whatever address was recorded by the judicial scrivener as the sale was completed.
There are some instances when some (or all) of this tax may be refunded to the buyer. Your Japanese real estate agent or tax accountant may be able to advise you about how to apply for an exemption to this tax. If the property is your primary residence, it is worth your time and attention to investigate an exemption.
Property Taxes
Property taxes are paid each year, based on the assessed value of the property. Those taxes are issued annually, early in the year, and can be paid all at once, or in four payments throughout the year.
Property tax bills are issued to the address that was recorded by the judicial scrivener at the time the sale was completed.
Banking for Foreigners in Japan
You may not be required to have a bank in Japan to complete a real estate transaction, but in many cases an expat that owns property in Japan will find having a bank account useful.
Most foreigners are ineligible for an account at most Japanese banks. However, the Japanese government will issue you a very simple bank account via the Japanese post office (JP Post); that is typically the first bank account for most expats living in Japan. As you live in Japan for an extended period of time, more traditional Japanese banks may offer you an account (typically after at least six months of continuous residency).
Setting up a business bank account in Japan as a foreigner can be difficult. You will almost always need to set up a local Japanese company to get an account. In some cases, a lawyer can serve as an agent of your company, and can help establish a functioning account via their own connections.
This guide was contributed by Graham Hill, real estate consultant at Find Hokkaido Agents in Sapporo, Japan.