Most foreigners in Japan rent, but an increasing number are staying long-term and looking to put down roots. However, buying real estate as a foreigner can be complex. The information in this article is based on first-hand experience and aims to clarify the processes and provide ballpark figures for costs. It will also help you avoid common pitfalls and become more knowledgeable about the pros and cons of property ownership in Japan. Most price estimates are based on the author’s personal experience in the Nagoya real estate market.
Shaky foundations
The first thing to do is take a look at the year the building or home was built.
After a devastating earthquake in 1978, Japan introduced new building standards in 1981. Thus, apartments built before June 1, 1981 are valued less. The 1995 Hanshin Earthquake led to another revision in 2000 concerning wooden structures, so wooden homes built before then are also less valuable.
Japan’s aging homes: A 20-year vintage
Even if you find a well-built used home, there is a stigma that a 20-year-old home is old.
Until the 1990s, many post-WWII homes were poorly constructed, leading to structural issues. Consequently, these homes may require significant repairs to become livable. So, if you do end up wanting to sell your well-built home from the early 2000s, some Japanese buyers will not consider it because of the image older homes have.
Moreover, there is a cultural tradition where newlyweds buy a new home. Thus, no matter how sweet the deal is, newlyweds shy away from used homes.
Additionally, unless you are handy with a hammer, renovation can be expensive. Just a shower renovation can be upwards of ¥3 million if done properly. So, it makes more sense in the long run to take a loan and get something newer if you are considering a home built in the 1960s to 1980s.
Rock-bottom property taxes
Japan's property taxes are low compared to countries like the U.S., where taxes can be burdensome.
For example, suburban homes near New York City usually have property taxes in the $6,000-$8,000 range annually. In contrast, a 20-year-old home in a large Japanese city can have yearly taxes around ¥120,000 and older homes can go down to as low as ¥50,000.
Home sweet loan
Another advantage of purchasing property in Japan is the low annual percentage rate (APR) for mortgages. For example, Shinsei Bank’s current variable rate is 0.42% and a 25-year fixed rate is only 1.35%. Considering inflation, a mortgage at these rates is basically like free money when compared to paying cash. Rates in the U.S. hover around 6.5%.
Mortgages in Japan also come with incentives such as life insurance. Many banks include clauses such as if the person who takes on the loan dies, the mortgage will be paid off in full for their spouse. For an additional 0.1% on the loan, there are also options where full loan forgiveness will occur just from a cancer diagnosis.
However, most banks will not issue a mortgage to a foreigner without permanent residency, no matter how many assets they have. However, one bank that does is Shinsei Bank. Another issue is the fact that the amount of loan you can get is based on your salary. Again, assets are not considered in the calculation.
If you have one outstanding mortgage, most banks will not issue another no matter how much your salary may have increased or how much cash you have. So, your dream of being the next Robert Kiyosaki and buying tons of properties to flip may not be attainable in Japan.
Don’t end up captive in a condo
A condo is a good choice if you live in a major city such as Tokyo or Osaka due to the lack of availability, cost of houses and their high resale value. Just be aware that condos in Japan face rising maintenance costs, which can make renting more economical in the long run. Let’s look at an example from Nagoya. The city can serve as a good yardstick since it is a major city, but it is not on the extreme end like Tokyo or Osaka.
Recently, a 65-square-meter, 2LDK condo built in 1988 was for sale there for ¥9.8 million. This may seem cheap, but its monthly maintenance fees were high at ¥42,000 per month. That, combined with the yearly property tax (usually around ¥100,000), upkeep and the loss of value as the building ages will probably not make sense financially when you compare it with a rental.
Moreover, when you rent, you can easily move if you get a new job.
Caveat emptor
Cheap condos in older danchi (public housing buildings) might seem appealing, with 55 -square-meter units going for as low as ¥3 million and maintenance fees around ¥13,000. While some do not have income restrictions, these buildings were poorly built and have little value in Japanese people’s eyes.
At this point, many units have been abandoned as their concrete crumbles and it may just be a matter of time before owners vote to tear them down and you only recoup a pittance on the original price. So, don’t let their low prices suck you in.
If you inherit an older home from your Japanese spouse's family, you might consider demolishing it to build a new one. Demolition costs can range from ¥2 million to ¥3 million if the home isn't attached to a neighbor's. Then, when you build your home you can choose from a number of plans or you may want to have your dream home built.
Considering inflation, a mortgage at these rates is basically like free money when compared to paying cash.
To hire an architect to design your home can cost from ¥3 million. Keep in mind that if you currently live in the home, you’ll have to pay rent for at least six months while your old home is being demolished and your new home is being built, moving costs (twice) plus real estate fees for the temporary rental that will house you and more. All of that can really add up, in addition to being quite the headache.
Realistically speaking, if you want a nice home in a decent location (excluding highly desirable locales), it is going to run you around ¥40 million to start in cities like Nagoya. In central Tokyo or Osaka, however, this figure might increase to ¥70 million or ¥80 million for a city-center condo unit. However, while condos might initially seem cheaper than homes, in the long-term they could end up costing more due to maintenance fees, depreciation and limited control over the property.
Building or buying a home or condo is a dream many of us have. Japan’s declining population and economic situation have created a serious buyer’s market. The low crime rate, low property taxes and APRs, and many other virtues make putting down roots in Japan enticing. Just make sure you are well-informed regarding the pitfalls.
There is an old saying in Japanese: “Tada yori takai mono ga nai. (Nothing is more expensive than free).”
So before buying, remember that just because something is cheap, that doesn’t mean it’s a good idea.
Dr. James Rogers is a university professor who has published books and over 50 articles on linguistics and Japanese studies. He is the author of the book "On Living and Working in Japan.”
© Japan Today
12 Comments
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GuruMick
Lots of fun renovating if someone else actually does the work.
You observe, cold beer in hand.
I would'nt buy new here as property values drop like a new car leaving the lot.
David Brent
Yes, because tradesmen here are experts at pulling the wool over people’s eyes!
Bad Haircut
Don't forget the old real estate adage: location, location, location. Something walkable to the shops and a station holds its value better even if older, especially if the station is an express stop. Also, having a park nearby can add value in a country where backyards are few and far between. Out of pure good luck, we had a park built just across from our apartment a couple of years ago, which has bumped up the value of our building and the others surrounding the park.
Also, having your own free car parking space is a bonus. Otherwise they can be pricey, at least 10,000 yen/month depending on where you live.
Hito Bito
Not saying that the basic argument is incorrect, but to compare "New York City" home taxes to "large Japanese cities" home taxes is rather disingenuous at best.
James Rogers
First, please note that I wrote "near New York City" (meaning its suburbs) and not in it, and the numbers I gave are the plain reality. Being that I was born and raised in NYC, and also lived in its suburbs, and am also a homeowner in Japan, in my actual, real-world experience, I can guarantee that there is nothing disingenuous. Just reality. One country has very high property taxes in the suburbs of large cities, and the other doesn't. And I am not including extremes like the Hamptons either. I'm giving you typical numbers of places where typical middle-class families live. Please realize that NYC is not just hipsters and Wall Street people. Every building has a janitor, every neighborhood has a police and fire station, and very normal people go to such jobs every day, with many commuting there from typical NYC suburbs, which unfortunately just have very high property taxes that normal people really struggle with. This has been the case for around 30 years now, but was not always this bad. This is NOT the case in Japan. That's all.
DanteKH
Why do you always have to compare Japan prices, taxes, work condition, culture, habits, etc only with USA ones?? Why not compare with European countries or Australia, Canada even?
We don't care about how much are taxes in New York, or food prices, or anything else. There is a totally different economy, culture, way stronger currency, etc. Stop comparing apples with lemons.
Jonathan Prin
Risk for losing a lot after an earthquake is real.
It is so cheap any westerners can buy nowadays. Going to buy soon a 40 M¥ flat in my country, which is the standard price for a 60m2 place. So prices evoked in the article are utterly cheap.
kohakuebisu
Nice to see the author on here. I wasn't aware of local governments selling single units in danchi blocks of public housing, I don't live in the city, but yes, a quick Google suggests you can buy one.
The article doesn't mention depopulation and akiya, so yes, location location location is even more important if you want your place to act as any kind of store of wealth. Even second hand mansions have been going up in Tokyo, so that is not as far fetched as it sounds. Real estate is a bad bet in many parts of Japan, but that means nothing for the location, location, location good bits where values have been rising.
If your future includes divorce, job transfers, or any other kind of relocation (illness, need to act as caregiver etc), then yes, it can be important for the house you buy to hold its value. This matters to ordinary people with ordinary lives who are not speculators. The savings rate in 2024 is nowhere near as high as it used to be, so many people have little by way of investments or savings to cover any loss incurred on real estate.
James Rogers
I only compare to NYC because I was born and raised there, and thus can give accurate info. Real estate is more than just pulling a bunch of numbers from the net. There's so much to know. You can't use home prices in the Hamptons as a NYC suburb since that area is for the very rich, where they have second homes. Brooklyn has been booming for some time, but using prices of apartments in its Brownsville or East NY areas are similarly inappropriate b/c those areas are extremely dangerous and poor. All New Yorkers know these things, but I wouldn't dare try to make comparisons to London or Sydney or Brussels because I don't have this real-world experience of living there.
And the largest group of English speakers in Japan are, by far, Americans, and tons of people are interested in NYC prices because so many people dream of living there. It's America's biggest city. Where else should I compare to? A small town in rural Idaho?
Sure, Japan and America are different places, but at the same time, all of my Japanese friends grew up playing little league and Nintendo just like I did. I grew up with the Clash and they grew up with Blue Hearts. Most people have the same kind of life...work 5 days a week, come home, watch tv, play with the kids, go for a drink with your buddy on the weekend, etc. Japanese homes are smaller and don't have central heating, but other than that, a home is a home and in either country, and most people have the same kind of life and needs. It's going to cost you from 40 million yen to own one in a decent location. So, I can't agree that I'm comparing apples and lemons...I think more like oranges and mikans.
James Rogers
Very true! Since I do construction, electrical work, car repairs, etc. myself, I am always very surprised at how much repairmen rip people off. Usually, just highly inflated prices when the customer doesn't know better, or sometimes just straight-up scams (completely unnecessary repairs). It's really a shame. I feel so bad for the elderly who often get targeted by such people. Then again, America has its fair share of this as well. But I think a lot of Japanese guys aren't as into DIY as those in America, thus it's epidemic here.
wallace
It's not difficult to find good honest tradespeople. Ask around in your personal contacts. Ask a building maintenance company. Ask your neighbours. If it's an expensive work like a new bathroom get two or three estimates. Prices have greatly increased because materials have greatly increased. I worked the trade for decades and never had an unhappy customer. People are willing to pay for a high grade job.
wallace
I have renovated many houses and apartments in the UK and here. I understand how tradespeople work.