The Basics of Buying Property in Japan

A simple guide to things to consider when buying real estate in Japan

A small real estate maquette next to a jar full of coins, home loan concept photo

During recent years Japan has witnessed an increase in the real estate purchase numbers. As Japan prepares to host the Olympic Games in 2020 and all the associated events, it also prepares to handle a large influx of tourists. Some foreigners also buy property in Japan for their private use as a country has a lot of touristic destinations to offer. For many people, this is a life-changing event that requires long and thorough preparation. In this article, we will give a very short overview of things to pay attention to when buying property in Japan.

Property Rights in Japan

In Japan, property rights for both nationals and foreigners are exactly the same. Anyone can purchase, sell, and inherit property without having to acquire specific visas or fulfill special conditions. The taxes are also the same for everybody. However, it also means that owning real estate in Japan does not grant non-residents any special rights to receive visas or get a permanent residence permit. Moreover, it is important to remember that in Japan land and building ownership are treated separately. Thus, be sure to confirm whether you are acquiring a land plot, constructions on (or below) it, or both.

Owning real estate in Japan does not grant non-residents any special rights to receive visas or get a permanent residence permit.

Property Prices Drop Over Time, Mortgages Don’t

As a rule of thumb, the price of constructions in Japan tends to decrease over time. To many foreigners it may come as a surprise, since investing in real estate brings income in other countries where market prices may rise as the area becomes more developed and populated. However, there are several factors that add to price depreciation tendencies in Japan.

Firstly, the country is prone to many natural disasters which may damage the building or the whole area. Moreover, it is not very popular in Japan to invest in repairs. Even without the contribution of earthquakes or tsunamis, residential buildings may be demolished and rebuilt every 20-50 years depending on their condition and housing demand. One should keep in mind that while land prices may soar, the value of buildings will most probably decline over time. Sometimes down to the point where the current owner will have to pay for the demolition to make space for the next owner to construct something new.

Secondly, take into account area development plans. Houses tend to be densely packed, sometimes leaving half-a-meter distance between windows. It is not rear that a new building pops up right in front of your balcony blocking the view or restricting the amount of sunlight that flows inside the premises. That will also decrease the price of the property.

It is especially important for those who have taken loans. Selling an estate or transferring it to the bank will not cancel you mortgage liabilities. In the majority of cases, you will still have to pay the remaining part of the loan after selling your property, because it has dropped in price since the construction has begun. The same goes for cases where your estate might have been wiped out by the disaster before you even have started using it.

Choosing a Real Estate Agent

Navigating the market may be extremely difficult due to peculiarities of legislation and a language barrier. Acquiring a residential house in Tokyo is not the same as purchasing a ski resort in Hokkaido. There are many legal procedures and regulations in the real estate industry, which you have to know and navigate well when dealing with different types of property. That is why it is important to cooperate with the agent that you trust and that acts in your interests.

Different agents may be specializing in different types of property or different locations. Before choosing a person, make sure that this agent has relevant experience and understands the area and property you are interested in. Choose someone who listens to what you want and does not rush into signing the contracts.

All agents will get their share of each deal they close. Beware of those who drag you through a lot of overpriced estates in poor condition before showing a decent one, which may still be quite average compared to what you are aiming for. However, after seeing a number of disappointing options people often feel inclined to settle for that last offer thinking that this is probably the best they can get. Luckily, all the agents have access to the same set of estates, and switching an agent does not mean losing a number of interesting options.

This is by no mean a full list of things you may want to remember when buying property in Japan. However, without a clear understanding of at least your ownership rights and market dynamics as well as the assistance of a trusted person representing your interests, it will be hard to make financially sound informed decisions.

Today’s “otsumami” – a bite size snack:

It is important to cooperate with the agent that you trust and that acts in your interests.

What do you think?

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