Since moving to Japan on a J-Find visa, I’ve been curious about buying a home in Japan. This is a big topic with lots of details to consider, and so after having discussions with several experts, Emil Gorgees from RealEstate.jp, James Howell from Kanachu, Masaru Takeyama from Resort Innovation, as well as from one recent homebuyer, I’ve come up with the following guide.
- Understanding the Basics
- Before the Purchase Process: Home Inspection
- Initiating the Purchase Process
- After the Purchase: What Next?
- Conclusion
Understanding the Basics
When you’re out there hunting for houses, you’ll need to decide between new and used properties. New homes come with the latest amenities and usually require less immediate maintenance, which is a big plus and probably more secure. On the other hand, older homes might need some work, but they often have more space and unique character.
So for me the first step is about looking inward: Why do I want to buy a home? How does it fit with my long-term plans in Japan? Is it about securing a future for my family or finding a place that feels like yours? Personally, I knew that even if I eventually go back and forth between Switzerland, Turkey, and Japan, I want to have a place in Japan that I can call home.
Determining what kind of mortgage you can secure
It’s crucial to first determine the kind of mortgage you can secure, as it will define your budget. When it comes to mortgages, your options and the ease of accessing them can vary significantly based on your residency status—whether you’re a permanent resident, here on a work visa, or otherwise.
Japanese banks, such as SMBC, offer various mortgage programs designed for foreigners. Look at your and possibly your spouse’s employment history, annual income, and other financial commitments. Generally, you can borrow up to 7–8 times your annual household income, but this can differ based on many other personal factors, such as your health, marriage status, age, job stability and the company you’re working for, and additional sources of income like bonuses or freelance work.
As part of the mortgage application process, banks will conduct a thorough personal assessment. Here are some key factors banks typically review:
- Employment and Work History. Banks will investigate your job stability and career longevity as indicators of reliable income.
- General Financial Situation. This includes an overview of your assets, liabilities, and other financial commitments.
- Salary. Generally, banks require that you earn at least ¥2-5 million annually, although this can vary depending on the bank and the specific mortgage product.
- Age. Your age can affect loan terms, with younger applicants potentially receiving longer amortization periods.
- Health. Your health and any disabilities can affect whether banks will be willing to consider your application, as health insurance is a requirement for many mortgages.
- Existing Mortgages. Any current mortgages you have will be considered as they impact your ability to service additional debt.
A good starting point is to thoroughly assess your financial standing and consult with a real estate agent who can guide you towards the right banking partner. These agents often have established relationships with loan officers at major banks and can advocate on your behalf, making the process smoother. Again, understanding the full scope of your financial capabilities and constraints not only helps in securing a mortgage but also in managing your expectations and aligning them with the realities of the Japanese real estate market.
Finding the Right Real Estate Agent
After establishing your budget, the next step is finding the right real estate agent for your needs. This partner is key to your success—not only do they help you find your ideal home, but they also guide you through the complex purchasing process in Japan.
Be prepared to deal with mounds of paperwork from multiple organizations involved in the process. It pays to be well organized, as losing track of one single physical document can be a huge setback. There are parts of the loan and purchase process that probably won’t make any sense. However, you just have to go through the process, step by step, the way it has been done for decades upon decades.
Perhaps the most important lesson I “learned” is to work with an excellent real estate partner. A skilled agent does more than negotiate deals; they understand your needs and can bridge any language gaps. At this stage, you will also need to formalize your partnership by signing a commission agency or broker agreement. It’s important to note that in Japan, the brokerage commission is typically set at 3%.
The ideal agent makes sure you are well-informed and comfortable throughout the entire journey, from scheduling property viewings to managing the final negotiations. They can offer insights into different neighborhoods and what they offer in terms of lifestyle, convenience, and investment potential. Additionally, your agent should be adept at interpreting contracts and dealing with the nuanced bureaucratic elements of property transactions in Japan, which can be formidable for those unfamiliar with the system.
Also, your real estate partner will have a solid network of contacts that can prove invaluable, including connections with banks for smoother mortgage applications, and relationships with surveyors and legal professionals to ensure that all aspects of your property purchase are handled with expertise. You should find someone who not only has the professional capabilities but also the personal touch to understand and prioritize your interests throughout the process.
Furthermore, consider whether a bilingual agent could facilitate smoother communications, making it easier to navigate the process and understand all the details. On the other hand, a Japanese-only agent might provide deeper local insights and a more thorough understanding of the market and cultural nuances. In some cases, hiring an interpreter might be a viable alternative, especially for creating clear communication while still benefiting from a local agent’s expertise.
Choosing the right property
Once you’ve teamed up with a real estate agent who understands your needs and preferences, you’re ready to choose the right property for you. Most property searches begin either by exploring listings on popular online platforms like SUUMO, at home, or through recommendations from your real estate agent who has access to industry databases like REINS (Real Estate Information Network System) that contain properties not listed publicly.
REINS, much like multiple listing services in other countries, provides comprehensive real estate information. However, listing properties on REINS involves certain costs, so not every property for sale might be included. This makes having a knowledgeable agent crucial, as they can access REINS for current listings and may also have information on properties not listed in the database. Every agent will have access to the same official database, so choosing the right partner in this stage really can make or break the deal. Alternatively you can find a piece of land, or a house, and contact the agent or property management company in charge of selling that property.
Selecting the right location requires careful consideration. You’ll need to think about accessibility to essential amenities like schools and public transportation. Additionally, the quality of local facilities—such as parks, grocery stores, and recreational areas or sports facilities—can greatly influence your quality of life.
Many prospective homeowners find that properties just outside major urban centers like Tokyo offer a balanced mix of affordability and community spirit. These areas often provide a more relaxed environment, with the added benefit of more spacious and more affordable properties compared to what you might find in the heart of the city.
In this step, your agent’s insights become invaluable once more. They can provide perspective on long-term value trends, community dynamics, and even specific property features that might not be obvious at first glance. Whether you’re looking for a modern apartment with eco-friendly features or a more traditional family home, your agent’s guidance will be key in finding a place that feels like home and fits your budget and lifestyle goals.
Before the Purchase Process: Home Inspection
Sakura Jimusho is a company that specializes in providing comprehensive real estate consulting services, including home inspections, property market research, due diligence services, and construction quality inspections. To our knowledge, they are the biggest home inspection company in Japan.
For inspections, they offer different packages based on the type of property. For example, their Apartment Basic Course is priced at ¥49,500 (tax included), while the Basic Course for Detached Houses is ¥66,000 (tax included). One of the best parts is that you can send them information about the layout and area of the property, and they’ll provide you with a detailed quote.
If you speak Japanese, a major draw for using Sakura Jimusho for inspections is that you can follow the inspector throughout the process and discuss the results in real time. This means that you can call out features that interest or concern you, or ask clarifying questions.
Initiating the Purchase Process
If you’re considering a new house or condo, begin with the Property Purchase Application (購入申込書, kounyuu moushikomisho), typically provided by the developer or the real estate firm. Due to high demand, particularly for new constructions, your application might enter a lottery if the number of applicants exceeds available units. Prepare for the possibility that your application may not succeed and expect to pay an application fee ranging from several tens of thousands to over ¥100,000.
For a pre-owned home, you start with a Declaration of Intent to Purchase (買付証明書, kaitsuke shoumeisho), signaling your serious interest and initiating negotiations. This often involves a deposit (separate from a down payment) that is forfeited if you suddenly decide to back out of the purchase.
Establishing Financial Commitment
In the negotiation phase, you’ll place a down payment (手付金, tetsukekin), which is usually about 10% of the home’s price. This down payment is later applied to the final payment when you close the deal.
Mortgage Pre-approval Process
After your intent to purchase is declared, it’s time to explore mortgage options. Discuss with your bank to undergo a financial review to determine your mortgage eligibility and establish the terms of your loan.
The Japanese mortgage process has two stages of approval: pre-approval and approval. The pre-approval process is a streamlined approval process before the official approval to reassure all parties that the funds will likely be available with the purchase, with the goal of saving everyone’s time in negotiations.
Once pre-approved, as long as all of the information you submitted is accurate and does not change negatively before the official approval application, the odds of failing the official approval are very small.
Examining Legal Disclosures
One of the most crucial documents in the buying process is the Explanation of Important Matters (重要事項説明書, juuyoujikou setsumeisho). Prepared by the seller’s agent, this document provides essential details that inform your purchase decision, covering:
- Any existing mortgages or encumbrances
- Property defects or damage
- Awareness of surroundings and neighbours
- Ongoing costs such as management fees
Finalizing the Sale
After reviewing all pertinent details and agreeing to the conditions, you will sign the Purchase Agreement (売買契約書, baibai keiyakusho), a contract that requires things like:
- A copy of your passport
- Stamp duty
- A registration certificate
- Your personal seal (印鑑, inkan)
- An inspection report detailing any issues with the property
After the Purchase: What Next?
The responsibilities that come with owning a home extend far beyond the initial purchase. In planning your finances, remember to account for ongoing expenses like property tax, insurance, and regular maintenance.
Property Tax
Property tax in Japan, known as 固定資産税 (kotei shisanzei), is assessed annually based on the property’s value. The tax rate is typically 1.4% of the assessed value, but this can vary slightly depending on the municipality. The assessed value is usually lower than the market value, but it’s still a significant ongoing expense. You can use tools and calculators available online to estimate the property tax for specific areas. One good website to get insights from is Rehouse from Mitsui.
Insurance
Home insurance (火災保険, kasai hoken) is another essential expense that is often required in the contracts for the mortgage itself. It covers potential damages from fire and natural disasters, such as earthquakes and typhoons. The cost of insurance can vary based on the coverage and the property’s location, size, age, construction, municipality, etc. Typically, you might pay between ¥20,000 to ¥40,000 annually for basic coverage, with additional premiums for more comprehensive plans.
Regular Maintenance
Regular maintenance includes everything from routine repairs to larger renovation projects. On average, the experts say homeowners should set aside about 1% of the property’s value annually for maintenance costs. For a property worth ¥30,000,000, this would mean budgeting around ¥300,000 per year, just in case.
Conclusion
To conclude, buying a home in Japan as a foreigner is indeed a significant commitment but also a deeply rewarding experience. I’d like to emphasize once again that understanding your financial standing and securing the right mortgage are foundational steps. Choosing a knowledgeable and experienced real estate agent can greatly ease the process, provide valuable insights, and bridge any language gaps.
