Buying a home in Japan as a foreigner is more straightforward than many people expect. Unlike many other countries, Japan does not have restrictions on foreign ownership of real estate. Whether you’re looking for an investment property, a second home, or a permanent residence, here’s a comprehensive guide to help you navigate the process.
1. Can Foreigners Buy Property in Japan?
Yes! Japan does not impose nationality restrictions on property ownership. Foreign buyers can purchase real estate in their name, and ownership rights are the same as those for Japanese citizens. However, if you’re planning to live in Japan, you’ll need a valid visa, as property ownership alone does not grant residency.
2. Understanding Japan’s Property Market
Before diving into the purchase process, it’s important to understand how Japan’s property market works.
- Freehold vs. Leasehold: Most residential properties in Japan are freehold, meaning you own both the land and the building. Some properties, particularly in central Tokyo, are leasehold, where the land is owned by a separate entity.
- Building Depreciation: Unlike in many Western countries where property values often appreciate, Japanese properties (especially wooden homes and apartments) tend to depreciate over time. Land, however, can retain or increase in value depending on location.
- Property Taxes: Japan has annual fixed asset taxes, and buyers also pay a one-time real estate acquisition tax.
3. Steps to Buying a Home in Japan
Step 1: Define Your Purpose and Budget
Decide whether you’re buying for:
- Personal residence
- Investment (rental income)
- A vacation home
Set a budget considering:
- Property price
- Taxes and fees (typically at most 10% of the purchase price)
- Mortgage (if applicable)
Step 2: Find a Real Estate Agent
Most real estate transactions in Japan go through agents. If you’re not fluent in Japanese, working with a bilingual agent who understands the needs of foreign buyers is crucial. In Japan, all the licensed agents can access the same national property database.
Look for an agent who:
- Specializes in assisting foreigners
- Can explain contracts and procedures in English
- You feel comfortable with and can trust
Step 3: Property Search and Viewing
Once you find a reliable agent, they will help you search for properties based on your criteria. Viewing homes in Japan is straightforward, but keep the following in mind:
- Apartments are usually smaller than in Western countries.
- Older properties may require renovation.
- Earthquake-resistant features are important.
- As of 2024, the inventory turnover rate for existing condominiums in Tokyo was 85.3 days
Step 4: Secure Financing (If Needed)
Can foreigners get a mortgage in Japan?
Yes, as long as you pay income tax with a stable income in Japan. With a working visa or permanent residency (ideally the latter) , some banks like SMBC, MUFG, Shinsei Bank, and Suruga Bank offer mortgages to foreigners, but requirements vary.
Mortgage Requirements for Foreigners:
- A valid long-term visa (PR is best)
- Stable income in Japan
- Good credit history
- Down payment (often 0 – 20%)
If you don’t qualify for a Japanese mortgage, consider if you can pay in cash or seek financing from a foreign bank that has a Japanese branch.
Step 5: Make an Offer and Sign a Purchase Agreement
If you find a property you like, you’ll need to:
- Submit a Letter of Intent (買付証明書 – Kaitsuke Shomeisho): This is a non-binding document stating your interest and proposed purchase price.
- Sign a Purchase Agreement (売買契約 – Baibai Keiyaku): Once the offer is accepted, a formal contract is signed, and a deposit (usually 5-10% of the price) is paid.
At this stage, a judicial scrivener (司法書士 – Shihoushoshi) will be involved to verify the legal aspects of the deal.
Step 6: Finalizing the Purchase and Property Registration
Once financing (if needed) is approved , you’ll complete the final steps:
- Settlement and Payment: The remaining balance is paid on the closing date.
- Title Transfer: The judicial scrivener registers the property in your name.
- Receive the Keys: Congratulations! You’re now a property owner in Japan.
4. Additional Costs to Consider
Beyond the property price, be prepared for additional costs:
- Agency Fee: 3% of property price + ¥60,000 + tax
- Registration Tax: 0.4% – 2.0% of property price
- Real Estate Acquisition Tax: 3% – 4% of property price
- Stamp Tax: ¥5,000 – ¥60,000
- Fixed Asset & City Tax: 1.4% annually
5. After Purchase: Managing Your Property
After purchasing your home, consider:
- Property Management: If you’re not living in Japan, hire a management company that can provide maintenance and pay fees on your behalf, as it’s hard for people overseas to open a bank account in Japan. They can also offer tenant support if it is an investment property.
- Insurance: Fire and earthquake insurance are highly recommended.
- Utilities & Address Registration: Set up electricity, water, gas, and register your new address at the local ward office.
Dovetail’s Thoughts
Buying a home in Japan as a foreigner is a smooth process if you have the right knowledge and a reliable agent to guide you. Whether for living or investment, understanding Japan’s real estate landscape will help you make an informed decision.
If you need professional real estate support, working with a bilingual expert can make the process even easier. That is why Dovetail is here for you. Feel free to reach out if you’re considering buying property in Japan!