Japanese real estate: buying a home in Japan

From its bustling metropolises to its beautiful rural towns, Japan is a great place for expats to settle down. But before you go into details (like whether to get a tatami or not), it’s good to look into the actual process of buying a home.

In Japan, this is a little different than many others worldwide. Free from restrictions yet unique in its bureaucracy, you’ll need to factor in these distinctions when buying real estate.

Here’s what you need to know:

The Japanese housing market and property prices

Japan has a unique housing market. Unlike many other large-economy countries, houses are not typically built to last. Wooden houses (木造住宅) make up about 90% of single-home buildings (一戸建て) and are generally razed and rebuilt by future owners.

Real estate typically exists for just 20 to 30 years and often decreases in value soon after purchase. Because of this short lifespan, Japan’s second-hand housing market is less attractive than abroad. That said, the land goes up in value, and therein lies the true worth of Japanese real estate.

Like the housing market, property prices are also unique in Japan. Apartments (アパート) generally cost more than houses. For example, in 2021:

• Custom-built houses with land (土地付き注文住宅) cost ¥44 million
• Ready-built houses (建売住宅) cost ¥36 million
• Condominiums (マンション) cost ¥45 million

As with other countries, large cities have the highest housing prices. While prices rise each year in hotspots like Tokyo, the vacancy rate of rural housing is increasing too. Japan’s aging population has created an excess in real estate that will likely grow in the future. As such, housing is seen less as an investment and more as a practical asset.

Homeownership in Japan

While homeownership is considered ideal, just over 60% of Japanese are homeowners. This figure has remained remarkably consistent over several decades. These homeownership rates are comparable with similar economies in Europe, including the United Kingdom (63%) and the European Union (EU) average (69.9%).

Older residents are more likely to own their homes, with some 89.4% of those aged 70 and older having ownership rights. Conversely, younger Japanese are less likely to own real estate. This has been linked to an uncertain economy, an aging population, and lower rates of ownership in metropolitan areas.

Many people buying their own home in Japan do so with the help of a mortgage (住宅ローン). Mortgage rates in the country are among the lowest in the world. However, due to the aging population, the affordable housing market is set to boom over time.

So, should you buy or rent?

Most new arrivals in Japan choose to rent. This allows them to explore the country and find the ideal city, town, or neighborhood. What’s more, many expats are (or will be) based in large metropolitan centers where renting is the norm. The average monthly rent in Japan ranges from ¥50,000–70,000 and is considerably more in the capital.

Some employers offer additional perks like accommodation. Expats also commonly stay in unique guest houses (ゲストハウス) since estate agents and landlords are notoriously strict when it comes to foreigners renting in Japan. Guest houses fill this gap by providing housing without requiring massive down payments or the use of guarantors.

If you are relocating to the country for a longer period of time, you might decide to buy a home instead. This begins with a trip to a real estate broker, either in-person or online.

Can expats buy real estate in Japan?

Simply put, legal residents and citizens alike can purchase apartments, houses, and land for development across Japan. Taxes and protocols are the same for everyone.

To finance your new venture, you can get a mortgage from a Japanese bank. Keep in mind that some banks are more hesitant about loaning to foreigners than others. For instance, most banks will require long-term or permanent residency. There are also set requirements, such as having a My Number (マイナンバー) and a Japanese bank account.

If you can buy real estate without getting a loan, there are almost no restrictions. Technically, you don’t even have to live in Japan.

Finding a property in Japan

The majority of property sales are brokered by estate agents (不動産業者) who operate both nationally and within specific regions. There are over 368,000 real estate companies across Japan.

Once you’ve decided on a specific area, you can register with an agent. You can include areas of interest, price points, and must-have housing features in your search.

Property agents

Your first step in finding a home is going to a trusted property agent with the right certification. A real estate license is a legal requirement and a sign of a legitimate business. You can sign up with multiple agents and ‘unsubscribe’ at any time. 

The most important quality of an estate agent is communication. It might be easier to pick an agent who is used to international clients. You can also find someone who speaks a language other than Japanese (日本語, Nihon go). Some online databases allow you to pick from bilingual or English-speaking agents.

As with real estate agents elsewhere, you want an honest realtor who knows and can explain the market. Avoid agents who tell you someone else has already expressed their interest every single time you go after a property. They are most likely trying to up the sale price and thus their commission.

Viewing and choosing a property

Once you’ve chosen a property, you can schedule a viewing through your estate agent. Aim to book multiple property visits in one day with the same agent. Also, be sure to follow standard Japanese etiquette by removing your shoes upon entry and do not use facilities like the bathroom.

Some realtors offer online viewings for people living outside of Japan. These often include apartments and complexes popular with internationals. Keep in mind, however, that photographs and videos never fully supplement in-person viewings, as you cannot see any potential defects. If you buy something when you’ve only seen it online, you do so at your own risk.

Where should you buy property in Japan

Buying real estate in Tokyo

As Japan’s capital and most populous city, Tokyo has the highest housing prices. You can expect to pay an average of ¥1,288,000 per square meter. The city consists of 23 wards with varying price levels; the central and western districts are among the most expensive, and there are more affordable neighborhoods in the east and outskirts. The most common forms of real estate in Tokyo are condominiums and apartments.

Given the city’s size and property prices, few of its residents own property. Ownership here is up to 30% lower than the national average.

Buying real estate in Osaka

Osaka is Japan’s third-largest city. House prices here exceed the national average, although they are lower than both Tokyo and Yokohama. The average land price is ¥324,000 per square meter.

The majority of the properties in the city are apartments. Osaka consists of 24 wards, with the two central wards, Chuo and Kita, being the most expensive. Like Tokyo, the majority of Osaka’s residents rent rather than own.

Buying real estate in Nagoya

The fourth-largest city in Japan is Nagoya. The city consists of 16 wards, with the central area of Naka being the most expensive. The average land price is ¥234,261 per square meter. Given these relatively low costs, the majority of Nagoya residents own their property. The average house size is also greater, with more detached house ownership.

How to finance a property purchase in Japan

Mortgages in Japan are generally reserved for residents who meet the following criteria:

• 20–65 years of age
• Being a permanent resident – although this is not a technical requirement, most banks will not lend to those without this status
• Having a stable income for at least one year as a full-time employee, or two years if self-employed

You can get a public or private, or a government-approved flat 35 loan. The latter is an advantageous fixed-rate mortgage partnership between the Japan Housing Finance Agency (JHFA – 住宅金融支援機構) and private institutions.

Most private loaners offer fixed-rate (固定金利), variable-rate (変動金利), and combination mortgages (固定金利期間選択). You can apply for one of these loans through a bank, mortgage broker, or credit union.

Assistance schemes

To reverse the population decline in rural areas, Japan is offering up to ¥1 million to families moving out of Tokyo. Single people can get up to ¥600,000. The actual amount you’ll get will be determined by the municipality you’re moving to.

This subsidy follows previous incentives that made the countryside cheaper. Notable examples include Japan’s housing benefit (すまい給付金) which ran from 2014-2022. This scheme offered a maximum of ¥500,000 cashback on certain home purchases.

What costs are involved in buying real estate in Japan

Buying your own home comes with a lot more costs than just that of the house and land it stands on. You’ll have to pay realtor fees, notary fees, annual taxes, and more. Costs involved include:

• Acquisition tax (不動産取得税) – 1.5% of the land value, plus 3% of the building value, billed within six months of purchase
• City planning tax (都市計画税) – an annual tax used for city planning that ranges from 0.2–0.4% of the property’s appraised value
• Fixed asset tax (固定資産税) – an annual property tax with a standard rate of 1.3% of the appraised value. However, it differs per area.
• Maintenance fees (管理費) – specific to apartment complexes
• Property insurance (損害保険) – some apartment complexes have mandatory insurance policies
• Realtor fee (不動産仲介手数料) – brokerage agencies take 3–4%, plus flat fees of ¥60,000
• Registration tax (登録免許税) – 1.5% of land value, 0.3% of the building value, and 0.1–0.4% of the mortgage value
• Stamp duty (印紙税) – paid when signing construction, sales, or mortgage contract, it ranges from ¥5,000–480,000

The process of buying an existing house in Japan

After you’ve done your due diligence and have decided on a property, you can start the buying process. In Japan, this can be lengthy and highly bureaucratic. It will involve the following:

Making an offer

You can make an offer through a formal letter of intent (買付証明書). It is important to only submit offers when you fully intend to purchase. Though not legally binding, backing out will sour your relationship with the estate agent.

Average negotiations range from up to 5% below the asking price on Tokyo properties, and 10% elsewhere. The seller will either agree, decline, or make a counteroffer.

Reading and preparing documents

If your offer is accepted, you will receive a lengthy document explaining important matters. This contains everything of note relating to the property, including survey results, management fees, zoning, and property type.

It’s important that you read this document thoroughly and have it reviewed by your broker and/or lawyer.

Paying the deposit

You should make a deposit of 10–20% (up to ¥10 million). Payment sometimes occurs before the contract stage. In this case, the estate agent will release the deposit when the contract is signed. You might forfeit the deposit if you pull out of the sale without just cause.

When it comes to purchasing costs, Wise has a specialist team to help move large transfers abroad and can save you money on currency exchange fees.

Contract signing

Both parties sign and seal contracts and purchase agreements. This often takes place at a bank. The deposit will then be cleared and paid, along with any outstanding fees. The registration of ownership is then completed by a legal scribe.

Final settlement

Your lawyer will then register the title change and you can send any remaining funds. This process can take up to two months to complete. After that, you’ll receive the new title deed.

Buying a newly-built home in Japan

If you’d rather be the first person to ever live in your house, you can also ask your estate agent for any new developments. New homes are often more sustainable than existing homes and cheaper than building your own.

The process is very similar to that of buying an existing property. The only difference is that you do not submit a formal letter of interest. Instead, you can let your interest known via a purchase application form. This usually comes with a high application fee and less negotiating power.

Building your own house in Japan

There’s something very satisfying about designing your own dream home. And luckily, Japan is a country where that’s within reach.

Anyone can legally buy land for a real estate project, especially residents. You can start by searching for a plot of land with a property agent. It is common practice to buy an old home for its land, raze it, and build a new home. Next, you’ll require planning permission. This is easily obtained as long as you meet local property regulations.

Construction is governed by regional legal ratios. These include a floor-area ratio and building-coverage ratio that together determine how much land a property can take up. Look for these when purchasing land for development.

If you need some help with the design, you can hire an architectural firm. Japan has a whole industry of homebuilding and many companies offer ready-made basic designs available for adaptation. There is also a recent trend toward easy-assemble prefab construction. Your architectural firm will typically receive quotes from builders.

Keep in mind that building your own property is more costly than buying (and living) in a ready-built home, with a difference of about ¥9 million. On average, custom-built homes cost ¥44 million versus a national average of ¥35 million for ready-built houses. It is worth noting that Japan offers subsidies for greener, eco-friendly new homes as well through the Sustainability Open Innovation Initiative.

Moving into your new home in Japan

Insurance

Home insurance is optional in Japan, with some stipulations. If you are buying a property with a mortgage, you’re required to take out mandatory fire insurance. This covers damage through fire, lightning, or explosions. Costs range from ¥20,000–40,000 on a two-year contract.

Additional types of recommended insurance in Japan include flood and earthquake coverage. These can all be covered by comprehensive insurance, but be sure to read the fine print.

Utilities and telecommunications

When you’re a new homeowner, you’ll need to take out a utility contract for your light, heating, and water. You can compare deals between providers; however, water is a public utility with no differences in rate.

Access to TV and internet requires a contract with a network operator and Internet service provider. These are frequently sold as all-in-one packages with other media.

Selling a home in Japan

Selling a home is much the same as purchasing a home. There are few restrictions on who can sell a property. While a property owner can sell privately, the vast majority of sales involve estate agents. As such, it begins with finding a reputable agent to assess the property value. This is usually provided for free.

The estate agent provides the listing. Agent fees vary and are typically charged upon closing. They include:

• Taxes – stamp duty plus income tax on the sale
• Agent commission – usually around 3% of the sale price
• Disposition of mortgage fee – required if a mortgage is outstanding
• Commission for the legal scrivener – required to complete the handover
• Surveyor’s commission – required by the terms of sale

Tips on buying real estate in Japan

Expats looking to purchase their own Japanese home may want to:

• Research areas thoroughly before committing to any purchase. If you don’t know the area, it’s recommended to rent there first, in case you don’t like it.
• Consider noise levels (e.g., neighbors) by visiting a property at different times throughout the day
• Learn about Japanese house prices and types before viewing
• Look into mortgage options by contacting your bank. Make sure you can meet the requirements of your chosen mortgage type.
• Factor in any additional costs from agent fees and taxes
• Read up on the 10 most common home-buying mistakes and learn how to avoid them

Useful resources

• ICLG – real estate laws and regulations in Japan
• Ministry of Finance (MOF – 財務省) – database of laws and policies
• Numbeo – average property prices in Japan
• Sustainability Open Innovation Initiative – incentives for building environmentally sustainable homes