There is a growing number of foreigners buying houses in Japan. The country's population is in decline as the migrant workforce expands. This means that as more people move to Japan the demand for Japanese homes rises.
This guide tells you what to consider when planning to buy a house in Japan. It covers everything from:
- key legal aspects to buying a house in Japan;
- post-purchase decisions;
- giving buyers detailed knowledge for their home-buying journey in Japan.
1. How Much is a House in Japan?
The Japan real estate price index has risen since 2020. Rising Japanese house prices are in line with the increase in the cost of living in Japan. The largest increase has been for Japanese apartments. However, the Japanese housing market has remained stable compared to overseas markets.
1.1. Japanese House Prices vs Land Prices:
How much is a house in Japan? That depends on where you want to live in Japan. The two areas that attract the most people are the Greater Tokyo area and the Kansai area. Tokyo real estate has higher average prices, about 53.56% more than Kansai real estate.
1.2. Greater Tokyo Area Prices vs Kansai Area Prices
2. Legal Aspects of Buying Property in Japan as a Foreigner
Foreigners looking to buy a house in Japan will find the legal landscape helpful. At the same time, there are specific requirements and restrictions to navigate. Here are the key legal considerations for non-Japanese buyers.
2.1. Can Foreigners Own Property in Japan?
The answer is 'yes'. Foreigners enjoy the same rights as Japanese citizens when buying house and land. Foreigners can buy Japan real estate regardless of nationality or visa status 6 (opens in new tab)7 (opens in new tab).
2.2. Do I Have to be a Resident to Buy Property in Japan?
The answer is no. But, there is a catch! You do not need a Japanese residence visa to buy property in Japan. Although you will need a valid residence visa when making a transaction with the bank 2 (opens in new tab)5 (opens in new tab). So, I recommend having a Japanese residency visa when you apply for a housing loan 3 (opens in new tab).
- Buying property in Japan as a foreigner involves documentation, such as proof of identity 2 (opens in new tab)4 (opens in new tab).
- If you are not a resident of Japan, you must report property purchases. This is according to the Foreign Exchange and Foreign Trade Control Act.
If you would like to learn more about Japanese visas, check out our article on Japanese visa types.
2.3. Japanese Property Rights and Ownership
Property ownership in Japan real estate is on a freehold basis. This gives the owner full rights without time restrictions 3 (opens in new tab). The same rules apply to both Japanese citizens and foreigners 2 (opens in new tab)5 (opens in new tab)11 (opens in new tab).
2.4. Japanese Government Permissions for Specific Land Types
Foreigners need government permission to buy land listed as 'agricultural' or 'forest' 1 (opens in new tab)3 (opens in new tab)5 (opens in new tab)7 (opens in new tab). Strict building restrictions may apply to these types of lands. Additionally, ownership restrictions may apply near military bases 1 (opens in new tab).
3. Understanding the Japan Real Estate Market
3.1. Japanese House Value vs Land Value
- Japanese housing quickly loses its value.
- Many Japanese homes are knocked down and rebuilt after 30 years (opens in new tab).
- In Japan, land retains its value, unlike Japanese houses. This makes land a better consideration for investors 2 (opens in new tab).
3.2. Importance of Earthquake-Resistant Japanese Homes
- Houses built after 1982 are built to withstand earthquakes. This is because of Japan's frequent earthquakes.
- Properties on soft soil, near the sea, or rivers are seen as high risk 2 (opens in new tab).
About 90% of all Japanese homes are built with wooden frames. This makes Japanese houses more flexible and less likely to break in an earthquake.
3.3. Ease of Access to Real Estate Information
Japanese real estate companies that provide housing listings. And some have English translation for properties across Japan 4 (opens in new tab):
3.4. Real Estate Market Growth
As mentioned as the beginning of this article, the residential property price index grew by 2.4% in 2023. This could mean price increases in existing condos in Tokyo and Osaka real estate 1 (opens in new tab)2 (opens in new tab)3 (opens in new tab)4 (opens in new tab)5 (opens in new tab). So, there could be a chance of pick up a Japanese investment property that could grow in value over time.
4. Strategic Insights for Foreign Buyers
4.1. Foreigners Can Face Limitations
It can be helpful to understand local property markets,rules, and limitations. For example:
- Some Japanese property sellers may have a 'gaijin ban'. This means they do not want to sell their Japanese house to a foreigner 7 (opens in new tab)8 (opens in new tab).
- Japanese rural residents often don't sell to people they don't know. In this case, you will have to get friendly with the whole neighborhood.
4.2. Buying a Japanese Abandoned House (Akiya)
Akiya (空家), Japan's empty houses, are popular with foreign residents looking for a good deal. However, you should be warned... Even though these abandoned houses come cheap, they usually need rebuilding.
If you want to learn more about the akiya housing market, check out our article on akiya houses in Japan.
5. What You Need to Know After Buying a Japanese House
5.1. Ongoing Costs and Taxes After Buying a Japanese House
Annual Taxes:
- Owners of Japanese real estate must pay Fixed Asset Tax and City Planning Tax annually 4 (opens in new tab).
- The tax on your land and the tax on your house are separate.
- After buying your Japanese house, inspectors will assess your house and property. This is because they need to determine the amount of tax you must pay.
- Asset tax is 1.4% of the assessed value of the property.
- The value is reassessed every three years, which can lead to changes in the tax amount.
5.2. Property Management for Overseas Owners
- Comprehensive Management Services: Those living outside Japan will need property management services. Companies like PLAZA HOMES offer extensive property management services. This includes tenant recruitment and various repair services 4 (opens in new tab).
5.3. Maintenance and Upkeep
- Regular Maintenance Plan: It is important to have a plan for regular upkeep of the property. Especially during extended periods when the owner is away 6 (opens in new tab).
5.4. Extra Financial Concerns
- Initial and Recurring Costs: Beyond the buying price, buyers must include other costs. For example, registration costs, brokerage fees, and other related expenses 4 (opens in new tab).
- Detailed Breakdown of Fees: These fees between 5-10% of the property's buying price. They include agent commission, registration fee, moving expenses, and contract-related fees 3 (opens in new tab).
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