Buying Real Estate in Japan: What to Know & Do

Planning to purchase real estate either for private use or as an investment?

What should you know about the inner workings of real estate ownership in Japan?

Here's a comprehensive guide on what to know upfront.

Can a non-Japanese buy a property in Japan?

Non-Japanese can purchase land or property in Japan, and there are no visa or citizenship requirements for you to make this purchase.

However, you cannot acquire a residence visa or investor visa by purchasing a property in Japan.

The same rules and legal procedures apply to Japanese and non-Japanese buyers alike.

Since the dollar and other foreign exchange rates are strong against the yen, it's a good time for foreign nationals to buy real estate in Japan.

Types of properties in Japan that foreigners can purchase

Many properties in Japan are available for foreigners, including the following.

a. New and pre-owned properties

Any new and pre-owned properties are available for foreigners to purchase.

Newly built properties are more expensive but offer more modern amenities with lower maintenance costs.

Pre-owned properties are less expensive and offer unique Japanese architectural features based on the previous owner. These properties might require more repairs if anything is outdated structurally.

b. Condominiums and single-family homes

Both condominiums and single-family homes are available for foreigners to buy.

For condominiums, foreigners can own the whole building or individual units of the building.

Standalone buildings that are single-family homes will allow more privacy and control over renovations and landscaping.

c. Investment properties

Any property that is for investment purposes is available for foreigners to buy. For example:

• Vacation rentals at popular tourist destinations

• Commercial properties, which include office buildings, retail spaces, and industrial properties

• Multi-family unit rentals

Types of property that foreigners cannot purchase

There are two laws that restrict certain property purchases for specific land designations. The restricted property types are as follows:

a. Property around Self Defence Force bases

In March 2021, the Japanese government restricted foreigners' purchases of real estate in the areas around Self-Defense Forces locations, remote islands near the national borders, and nuclear plants to mitigate risk to Japan's national security.

b. Property designated as “forest” or “agricultural”

The Foreign Trade Control Act prohibits foreign nationals from buying land with the destination of “forest” or “agricultural” without approval from the government.

How to find a Japanese real estate agent

Choosing the right real estate agent can make a significant difference when buying real estate in Japan.

When researching property in Japan, seek advice from local real estate professionals to ensure compliance, accurate documentation translations, advice on price ranges and market trends, help with transaction activities, property requirements, local knowledge about neighborhoods, and assistance with viewing the property.

Enlisting a real estate agent requires drafting and signing a commission agency-broker agreement. In Japan, brokerage commission fees are, on average, 3%.

There are more than 120,000 real estate companies in Japan, yet only a few of them support foreigners' real estate purchases. Bilingual real estate companies are mostly based in Tokyo and other major cities.

Look for a real estate company with experience helping foreign buyers from overseas. The process differs from Japanese citizens purchasing property, as agents are required to prepare extra documents and handle overseas remittances.

A step-by-step guide to buying real estate in Japan

Japan's real estate market presents unique practices and a distinct buying and selling process compared to other countries.

Here's a step-by-step breakdown of the process for foreigners buying property in Japan.

Step 1. Find and contact a bilingual realtor

Working with local real estate professionals provides you with in-depth knowledge of the local market for Japanese houses, including current trends, property values, and potential investment opportunities.

Local professionals understand the cultural nuances that can impact real estate transactions, such as negotiation customs and local customs related to property ownership.

Additionally, local professionals often have a network of contacts, including property developers, contractors, and legal experts, which can be invaluable during the buying process.

Partnering with local real estate experts can increase the likelihood of a successful and financially sound property investment in Japan.

Step 2. View and assess the property

Property features and standards in Japan differ from those in the US or Europe.

For example, finding a house over 100 square meters with more than two bathrooms may be challenging, depending on your price range. Keep that in mind when presenting your wishlist to your real estate agent.

Step 3. Express your interest

Clearly express property purchase interest through sending a Letter of Intent or purchase application.

Step 4. Negotiate with the seller

The next step is to negotiate the purchase price, etc. This can take anywhere from 7 days to 4 weeks.

Step 5. Close the deal

Your real estate agent will provide you with sales contract documents that include the title deed, description of the property, and provisions.

When purchasing a property in Japan, it is customary to make a cash deposit to the seller. This deposit typically amounts to 10% of the property's value and is paid to a third-party service, such as an escrow service.

Buyers purchasing real estate in Japan via a mortgage must pay a cash deposit.

Step 6. Finalize the settlement

Once the final settlement has been reached, the transfer of ownership will often take place at the buyer's bank, which is managed by a judicial scrivener.

The buyer must pay the remaining balance to the seller's account, after which the property title will be transferred to the buyer.

The seller will then deliver the keys to the property, which will signify that the transfer of ownership is complete.

Necessary legal documents for foreign residents of Japan purchasing real estate in Japan

If you are an expat living in Japan as a resident, the following are the required documents to prepare in order to purchase real estate in Japan.

1. Certificate of residence

Check out our guide on how to obtain your certificate of residence, juminhyo.

2. Identification

Foreign nationals who live in Japan are required to have a valid residence card, which is called a zairyu card.

Buying property in Japan without a valid residence card is challenging because of certain legal, financial, and administrative requirements, such as registering the property with the local government.

3. Registered seal (jitsuin) / certificate of seal impression (inkan shomei)

A registered seal is used instead of a signature on official documents in Japan. So you must have a registered seal or jitsuin to buy property. The seal must be registered with the municipal office of a city, ward, town or village.

Once you register your seal, you can obtain a certificate of your seal impression (inkan shomei). This is similar to a notarized signature in the West.

If you do not have a seal, obtain a notarized affidavit for your signature from your consulate.

4. Japanese bank account information

Opening a bank account in Japan can be challenging for foreign nationals due to the language barrier and the country's strict banking document requirements. However, with the right preparation and documentation, foreign nationals can open one.

Few bank employees speak English fluently, and you will need to have a Japanese-speaking interpreter go with you to the bank when opening an account. However, there are some banks in Japan that provide services to foreigners, so they can conduct all business in English.

Necessary documents for non-residents of Japan

If you are not a resident of Japan, you will need an affidavit to purchase real estate in Japan.

In cases where a non-Japanese resident does not have a personal seal (hanko), the affidavit proves the address and signature of the non-resident.

Affidavits need to be certified by a notary public in their home country but may also be certified by the consulate or country's embassy within Japan.

What happens post-property purchase?

Once you've purchased property in Japan, you will be responsible for two main property taxes:

• Fixed Asset Tax (固定資産税, koteishisanzei): An annual tax based on the value of the land and buildings, about 1.4% of the assessed value.

• City Planning Tax (都市計画税, toshikeikakuzai): If your property is located in a designated city planning area, then the city planning tax will be imposed on your property.

If you are a resident of Japan, then you can easily receive these tax notifications.

However, non-Japanese residents must appoint a tax representative to ensure their taxes are paid and that someone receives important notices related to their property.

If you need someone in Japan to be your tax representative and domestic point of contact, MailMate is your answer.

As a tax representative, MailMate will call the tax office on your behalf and handle the paperwork to become your tax representative for your property.

You can view any tax-related property notices on your online dashboard as MailMate receives them. Then you can decide to open, request forwarding to yourself, get bills paid, and shred mail if you desire.

Founded in 2019, MailMate has simplified property ownership for foreigners living abroad and is an increasingly popular option recommended by users and well-known industry figures.

Additionally, if you use MailMate's tax representative service for property owners, MailMate will take care of filing the tax representative form with the relevant tax office on your behalf.

Navigate Japan's tax system with an experienced tax representative service tailored for foreign property owners!

A quick look at property purchase costs in Japan

The following are some of the major costs to consider when purchasing real estate in Japan.

Frequently asked questions

Can foreign residents/expats get a bank loan in Japan?

A frequently asked question is whether non-Japanese buyers can get a bank loan in Japan. Japanese bank loan interest rates are known to be low, making them attractive to foreign investors.

There are a few requirements for getting a bank loan in Japan.

• You have permanent residence in Japan or are holding a working visa.

• You must have lived in Japan for at least one year.

• You can get a loan if you have lived in Japan for over three years and worked for more than five years.

Additionally, you are most likely to be regarded favorably by a lender if you have permanent status or are married to a Japanese citizen. Some banks also lend to foreign nationals with long-term work experience in Japan.

Japanese banks that have house loan offerings, such as Mizuho and Shinsei, conduct a personal assessment by checking the following:

• Current employment and work history

• Financial situation

• Current salary

• Age

• Mortgages you currently have

Is investing in property in Japan a good decision?

Foreign nationals can invest in and buy property in Japan, even if they do not reside there. Many overseas investors do so to diversify their property portfolios and benefit from the country's stable economy and comparatively affordable property prices.

Foreign investors looking to buy property in Japan from outside the country should work with a local real estate agent or attorney who can help them navigate the transaction's legal and financial aspects. This may include securing financing from a Japanese bank or working with a guarantor company to obtain a loan. It is highly recommended that you build your team with a Japanese real estate agent as they can assist your investment.

It's important for foreign investors to keep in mind the tax implications of owning property in Japan, as well as any fees or expenses related to managing the property from abroad. 👉 Check out our tax calculator for properties in Japan.

While cash is typically preferred in Japan, obtaining a mortgage may be necessary to have enough funds to purchase a particular property.

Working with a reliable local professional can help foreign investors navigate these complexities.

In closing

Buying real estate in Japan can be a complex process, but working with bilingual professionals can lessen the stress of venturing into the Japanese property market.

Consider MailMate if you're looking for someone to be your domestic point of contact and your property's tax representative.

MailMate can also help you with your utilities, wifi, house insurance, and more!