A Beginner’s Guide to Purchasing Real Estate in Japan as an Expat

As an expat in Japan, you might be considering the prospect of investing in real estate. This blog post aims to demystify the steps involved in buying property as a foreigner in Japan. From legal obligations to financing options and taxes, we’ve got you covered!

Can Foreigners Purchase Real Estate?

Yes, foreigners can indeed buy real estate in Japan. However, there are certain procedures and restrictions that non-residents need to be aware of. Non-resident buyers are required to report their transactions to the Bank of Japan under the Foreign Exchange and Foreign Trade Act. It’s important to note that if you are purchasing real estate for personal residence or for your family’s use, this reporting obligation may not apply.

Tips: For those who are interested in the other contries’ situations, this website provides list of contries with conditions and restrictions for foreigners to buy real estate.

Reporting to the Bank of Japan

If you are a foreigner living abroad and seeking to invest in real estate in Japan, you will need to report the transaction to the Bank of Japan. However, as mentioned earlier, this reporting requirement doesn’t apply when buying property for your own or your family’s residential purposes.

Access to Housing Loans

Non-resident foreigners may find it challenging to obtain housing loans, which come with favorable interest rates (0.5~3%) and tax benefits. Also, the Group Credit Life Insurance (Called “Dan-shin,” or “団体信用生命保険” in Japanese) offers exclusive benefit for housing loan borrowers as it provides life insurance coverage equivalent to the outstanding loan balance, proving housing security for their family in unfortunate circumstances. The eligibility for housing loans is relatively easier for individuals with permanent residency or those married to Japanese citizens. Major banks usually require the following conditions for housing loan approval:

Possession of permanent residency or a spouse who is a Japanese citizen
Employment and tax payment in Japan
Residency in Japan

Getting a housing loan without permanent residency is possible, though it requires individual evaluation. Some financial institutions, such as SMBC Trust Bank and Shinsei Bank, do offer housing loans tailored to foreign buyers. See also How to get housing loan in Japan as a foreigner.

Post-Purchase Procedures

After purchasing real estate in Japan, it is crucial to register the property and the owner under the real estate registration system. Regardless of whether you are a foreigner or a non-resident, you can register as the property owner.

When buying through a real estate agent, they will guide you through the necessary registration procedures. However, if you decide to purchase directly from the seller, it’s advisable to seek advice from a legal professional. You can consult either a lawyer or a “shihoushoshi” (司法書士), a specialized professional who handles real estate registration and is usually more cost-effective and experienced in this matter.

Documents such as the registered seal certificate and resident certificate are required for registration. Note that these documents may not be issued to short-term residents (less than 3 months). In such cases, you can obtain alternative documents from your country’s embassy in Japan.

Importance of Property Registration

Property registration ensures the accuracy of real estate information in the market and safeguards the safety of contracts through a public registration system. The registration record is open for anyone to access. Failure to register the property may lead to complications in case the seller sells the property to a third party, making the third party the legitimate owner, despite your prior purchase (Civil Code Article 177). Always verify property registration before making any purchase.

Taxes and Fees Involved in Real Estate Transactions

When buying real estate in Japan, be prepared for various taxes and fees. These typically amount to around 5% of the property price and may include:

Real estate income tax
Consumption tax
Local consumption tax
Stamp duty at the time of purchase
Registration license tax at the time of registration
Fixed asset tax and city planning tax for property owners

For rental income, you may also be subject to income tax, resident tax (for residents), and individual enterprise tax (if applicable).

Overseas Profit Transfers

When sending investment profits abroad, any remittances exceeding 2 million yen require identity verification. Additionally, if you are carrying cash or checks worth more than 1 million yen when leaving Japan, you need to submit a written declaration to customs.

For convenient overseas transfers, you can use services like WISE, which offers significantly lower exchange and transfer fees. They allow instant transfers for amounts less than 1 million yen per transaction.

Understanding Property Value in Japan

It’s essential to recognize that in Japan, buildings tend to depreciate over time, while land typically retains its value. This distinction is crucial when considering the long-term investment potential of real estate.

Conclusion

Buying real estate in Japan as an expat can be a rewarding venture if you navigate the process with care and understanding. By being aware of the legal obligations, financing options, taxes, and registration procedures, you can make informed decisions and secure your investment in this dynamic and fascinating country.