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Everything you need to know is included in our Japan Property Pack
Japan, with its beautiful natural scenery, rich cultural history, and friendly locals, is a popular destination for foreign investors looking to purchase real estate.
However, understanding the legal framework and regulations related to buying property in a foreign country can be difficult.
That's why this guide is here to help! We'll explain how the property market works in Japan in an easy-to-understand way, covering all the information you need to know.
Also, for a more in-depth analysis, you can check our property pack for Japan.Can you purchase and own a property in Japan as a foreigner?
If you are American, we have a dedicated blog post regarding the property buying and owning process in Japan for US citizens.
In Japan, foreigners have the opportunity to buy real estate, including land, under conditions that are largely similar to those for Japanese citizens.
This is somewhat unique, as many countries have restrictions on foreign land ownership.
Firstly, as a foreigner, you can indeed own land in Japan. There's no legal distinction in land ownership rights between a foreign individual and a Japanese citizen. This means you can purchase residential properties, commercial buildings, and even undeveloped land.
However, owning land in Japan doesn't automatically grant you residency rights. If you're considering living in the property you purchase, you'll need to acquire the appropriate visa independently.
The process of buying property doesn't directly influence your visa status, nor is a specific type of visa or residency required to make a purchase.
Regarding your rights as a foreign property owner, they are much like those of a Japanese citizen. You have the right to sell, rent out, or remodel the property as you see fit, within the confines of Japanese law.
There are no specific rules or restrictions based on your country of origin. Japan treats all foreign investors in real estate equally, regardless of their nationality. This uniform approach simplifies the process for international buyers.
As for government authorization, there's no need for specific approval from Japanese authorities to buy property as a foreigner. The process involves standard real estate transactions, including due diligence, property inspection, and legal paperwork, much like it would for a local buyer.
There isn’t a minimum investment requirement for buying property in Japan. You can purchase property at any price point, whether it's a small apartment or a large commercial building.
One thing to note is that while purchasing the property might be straightforward, securing financing as a foreigner can be more challenging. Japanese banks are often hesitant to offer loans to non-residents or those without a stable income in Japan. Some foreign banks and financial institutions do provide mortgage services for property purchases in Japan, but it's wise to explore these options before committing to a purchase.
Lastly, it’s important to be aware of the additional costs involved in purchasing property in Japan, such as agent fees, property acquisition tax, registration tax, and legal fees. These costs can add a significant amount to the overall investment.
Can you become a resident in Japan by purchasing and owning a property?
In Japan, purchasing property does not automatically grant you residency rights, nor is there a specific investment scheme that provides residency or citizenship through real estate investment.
This is a key difference from some other countries that offer residency or citizenship through investment programs.
The Japanese government does not currently offer a 'Golden Visa' or similar residency-by-investment program. This means you can't become a resident simply by buying property, regardless of the value of the investment. The process of acquiring residency in Japan is separate from property ownership and typically involves employment, family ties, or long-term study in the country.
If you're interested in gaining residency in Japan, you'll need to follow the standard visa and residency application processes. These processes involve obtaining a visa based on employment, family status, education, or other accepted criteria.
Once you have a valid visa, you can apply for residency, which comes with its own set of requirements and procedures.
Regarding permanent residency, it's something that can be applied for after living in Japan for a certain number of years under a valid visa status. The exact requirements for permanent residency can be quite detailed and typically include factors like the length of stay in Japan, your conduct during that time, and your ability to support yourself financially.
Permanent residency is a step towards eligibility for Japanese citizenship, but holding property in Japan doesn't directly influence this process. Applying for citizenship involves additional requirements, such as demonstrating proficiency in the Japanese language, a commitment to living in Japan, and renouncing any other citizenships, as Japan does not allow dual citizenship.
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Market data
You can find fresh and updated data in our pack of documents related to the real estate market in Japan.
If we look at the the GDP per capita indicator, it seems that Japanese people have become -0.3%poorer throughout the past 5 years.
If the population becomes poorer, there may be a decrease in demand for real estate, potentially causing prices to decline in the future.
If we check the data reported on Numbeo, we see that residential real estate in Japan offer gross rental yields between 1.1% and 3.8%.
Actually, these values for rental yields can be considered as "minimal," which means they represent the lower end of the spectrum or the least desirable returns on investment in the real estate rental market.
To know more, you can also read our dedicated article: is it a good time to buy a property in Japan?
The life as an expat
Living as an expat in Japan can be a rewarding and eye-opening experience.
Japan is known for its unique culture, ancient traditions, and stunning natural beauty. Expats in Japan can enjoy a wide range of activities, from exploring the bustling cities to taking part in traditional festivals. The country is also home to a variety of cuisine, from sushi to ramen, and a vibrant nightlife.
The cost of living in Japan is relatively high, but there are many ways to save money. For example, public transportation is affordable and convenient, and there are many discount stores and supermarkets where expats can find affordable goods. Expats in Japan can also benefit from the country’s excellent healthcare system and its low crime rate.
Living in Japan also presents some unique challenges. Language can be a barrier for many expats, as English is not widely spoken. Additionally, the Japanese culture can be quite different from what expats are used to, and it can take some time to adjust. However, with patience and perseverance, expats can learn to enjoy the unique culture and make a home in Japan.
What are the best places to buy a property in Japan?
This table summarizes some of the best places to buy a property in Japan.
| City / Region | Population | Average Price per sqm (JPY) | Strengths |
|---|---|---|---|
| Tokyo | ≈ 14 million | 800,000 - 2,000,000 | Capital city, economic powerhouse, cultural hub, diverse opportunities |
| Osaka | ≈ 2.7 million | 500,000 - 1,500,000 | Business and commercial center, vibrant food scene, historical sites |
| Kyoto | ≈ 1.5 million | 500,000 - 1,500,000 | Historical and cultural capital, UNESCO World Heritage Sites, traditional arts |
| Fukuoka | ≈ 1.6 million | 300,000 - 1,000,000 | Thriving metropolitan area, lively street food culture, access to nature |
| Sapporo | ≈ 1.9 million | 300,000 - 1,000,000 | Largest city in Hokkaido, winter sports, scenic landscapes, annual Snow Festival |
| Nagoya | ≈ 2.3 million | 400,000 - 1,200,000 | Manufacturing hub, rich cultural heritage, modern architecture |
| Kobe | ≈ 1.5 million | 400,000 - 1,200,000 | Port city, international flair, famous Kobe beef, picturesque waterfront |
Want to explore this further?
- Is it worth it buying property in Tokyo?
- Is it worth it buying property in Osaka?
Do you need a lawyer to buy a property in Japan?
When purchasing a property in Japan, engaging a local lawyer can provide valuable assistance in navigating the legal aspects and ensuring a successful transaction.
One crucial document they can help you with is the Purchase Agreement (Keiyaku), a legally binding contract between the buyer and seller that outlines the terms and conditions of the sale.
The Japanese lawyer can also assist with conducting a Property Title Search (Tōsho-kensaku), to verify the property's ownership status and identify any potential legal issues or encumbrances.
Additionally, they can guide you through the process of obtaining necessary permits and approvals, such as approval from the local Land Registry Office or relevant authorities.
They will ensure that all applicable taxes and fees, such as the Real Estate Acquisition Tax and Stamp Duty, are paid correctly and in compliance with Japanese laws and regulations.
What are the risks when buying real estate in Japan?
We've got an article dedicated to the risks associated with purchasing property in Japan.
1. Land Use and Zoning Restrictions
Japan has strict land use and zoning regulations that vary across different regions and municipalities. It's crucial to understand the specific zoning restrictions and permitted land use for the property you intend to purchase. Ensure compliance with these regulations to avoid legal complications or limitations on property usage.
2. Earthquake and Natural Disaster Risks
Japan is located in a seismically active region and experiences earthquakes, tsunamis, and other natural disasters. Assess the property's vulnerability to these risks and consider appropriate measures, such as earthquake-resistant construction or insurance coverage, to mitigate potential damages and financial losses.
3. Property Size and Building Codes
Japan has regulations regarding minimum property size and building codes. Ensure that the property you intend to purchase meets the minimum size requirements for residential use and complies with building codes for safety and structural integrity.
4. Japanese Language and Contracts
Japanese language proficiency is essential for navigating real estate transactions in Japan. Many contracts and legal documents are in Japanese, so it's advisable to engage with a reliable interpreter or bilingual professional who can assist you in understanding and negotiating the terms of the contract.
5. Foreign Ownership Restrictions
Japan imposes certain restrictions on foreign ownership of real estate, particularly for properties located near military bases or strategic locations. Research the specific regulations and limitations on foreign ownership, and consult with experts familiar with Japanese real estate laws to ensure compliance.
6. Maintenance and Renovation Costs
Consider the potential maintenance and renovation costs associated with owning property in Japan. Older properties may require updates or renovations to meet modern living standards or earthquake safety standards. Evaluate these potential expenses and factor them into your budget and decision-making process.
7. Cultural Etiquette and Integration
Moving to Japan involves adapting to a different culture and social norms. Familiarize yourself with Japanese customs, etiquette, and social practices to integrate smoothly into the local community. Respect cultural norms and traditions to foster positive relationships and avoid misunderstandings.
Everything you need to know is included in our Japan Property Pack
What are the documents needed for a real estate transaction in Japan?
When buying a property in Japan, the documents needed include:
1. A valid passport or residence card
2. A real estate contract
3. A deed of transfer (Jyuminhyo)
4. A certificate of residence (Jyuminhyo)
5. A copy of the family register (Koseki Tohon)
6. A copy of the buyer's tax return (Shotoku Shomei)
7. A copy of the seller's tax return (Shotoku Shomei)
8. A certificate of seal registration (Inkan Shomei)
9. A copy of the seller’s bank statement
10. A copy of the buyer’s bank statement
We review each of these documents and tell you how to use them in our property pack for Japan.
What are the tips for negotiating with Japanese people effectively?
In Japan, cultural norms and etiquette play a significant role in negotiations, making it important to understand and respect the local customs.
When initiating the negotiation, it's crucial to show respect and build a harmonious relationship with the seller or their representative. Use polite language, bow when appropriate, and demonstrate a genuine interest in their background and culture.
Thoroughly research the local property market in the specific region of Japan where you are buying before entering negotiations. Understand the average property prices, recent sales data, and any unique factors that may affect the property's value in that area.
During the negotiation process, maintain a patient and calm demeanor. In Japanese culture, rushed decisions are generally discouraged. Take the time to carefully consider the terms and demonstrate flexibility when discussing price, terms, or other conditions.
Politeness and humility are highly valued in Japanese negotiations. Avoid confrontational or aggressive behavior, as it can damage the relationship and hinder the negotiation process. Instead, focus on building trust and fostering a cooperative atmosphere.
Can foreigners obtain a bank loan in Japan?
Yes, foreigners can obtain property loans in Japan. The Japanese banking system allows non-residents to apply for property loans, subject to certain conditions and requirements.
To obtain a property loan in Japan as a foreigner, you'll usually need a valid residence permit, proof of income or employment, and meet the specific criteria established by the lending institutions.
Some banks in Japan that can grant mortgages to foreigners include Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Banking Corporation (SMBC), and Mizuho Financial Group.
Moreover, in Japan, the mortgage market offers borrowers an exceptionally favorable 20-year interest mortgage rate ranging from 0% to 3%, making it highly accessible and appealing for those seeking housing loans.
What are the taxes related to a property transaction in Japan?
Here is a breakdown of taxes related to a property transaction in Japan.
| Tax | Description | Calculation | Who pays |
|---|---|---|---|
| Acquisition Tax | Tax on the acquisition of real estate | 3% of the property sale price for residential properties and 4% for non-residential properties | Buyer |
| Stamp Duty | Tax on the execution of legal documents | Between 0.01% and 0.2% of the property sale price | Buyer |
| Capital Gains Tax | Tax on the capital gain from the sale of a property | 39.6% on net gains for property held for less than five years and 20.3% if held longer | Seller |
| Fixed Asset Tax | Annual tax payable by property owners in Japan | Varies from 0.3% to 4% (usually 1.4%) of the property's assessed value, depending on location | Owner |
| City Planning Tax | Annual tax to fund city planning and development | Ranges from 0.2% to 0.4% of the property's appraised value | Owner |
What fees are involved in a property transaction in Japan?
Below, you'll find a list of fees involved in a property transaction in Japan.
| Fee | Description | Calculation | Who pays |
|---|---|---|---|
| Registration Fee | Fee for the registration and transfer of real estate | A flat rate of 2% on the valuation of the property as determined by local government agencies | Buyer |
| Legal Fee | Fee for legal services related to the property transfer | Negotiable, but typically around 0.1% of the property value | Seller or Buyer |
| Real Estate Agent Fee | Fee charged by real estate agents for their services | Typically around 3% to 4% of the property purchase price | Seller or Buyer |
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Buying real estate in Japan can be risky
An increasing number of foreign investors are showing interest in Japan. However, 90% of them will make mistakes. Avoid the pitfalls with our comprehensive guide.