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Guide to Buying Property in Japan
Researching House Loans in
Japan
One of the first things you will want to do before looking at properties to purchase is to shop around and consult with several banks regarding house loans or mortgages. You should check the total amount you can borrow and under what terms; how long and at what interest rate (i.e. 2 - 3.5%). Interest rates between banks may vary and or you may not be approved for a loan at some banks.
Eligibility
In most cases in Japan, to be eligible for house loans and mortgages you will need permanent residency status or a Japanese spouse.
It will also help if you have lived in Japan for more than 5
Years, speak Japanese, have a sizeable income, and a good relationship
with your bank.
It is also favorable if there is some way you can show that
you intend to live in Japan for a long time – have a Japanese
spouse and or family in Japan, a very permanent job, or other
long term commitments or plans.
Note: Banks are not likely to grant house loans or mortgages
if you are a newcomer to Tokyo and or are only here on business
for 2-3 years (this is partially due to the fact that interest
rates in Japan are very low).
Shopping for Properties
After checking eligibility and the terms of your house loan
with the bank you will have a good idea of your budget for the property
and it is time to start shopping. Depending on the type of property
you are looking for you might see as many as 20 properties before
deciding to purchase.
Types of Properties in Tokyo
Basically, in central Tokyo (minato-ku) there will be more apartments
than houses and the further you go out from the central area,
especially outside the JR Yamanote line, the more houses are
available.
Property Value in Tokyo
Some of the better values in Tokyo, are on properties that are
more than 5 years old.
Japanese people like new things (homes, cars, electronics) so
brand new apartments have a premium on the price (a lot of times
Japanese people only see the model room and buy without seeing
the actual unit). Therefore after about 5 years property values
drop considerably.
In most cases properties which offer the best value and slowest
rate of depreciation are ranked as follows:
Buying Property for Private Use
1.buying a brand new house
2.buying a 2nd hand apartment
3.buying a brand new apartment
4.buying a 2nd hand house
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Buying Property for investment
1 buying a 2nd hand apartment
2 buying a brand new apartment
3 buying a brand new house.
4 buying a 2nd hand house
For maximum capital / income gain it is best to a buy 2nd hand
apartment, renovate it, and rent it out or re-sell.
In the better locations - Azabu, Omotesando, Akasaka, Aoyama
- buying a brand new apartment is a good investment because
you can rent it for a higher rent or flip it.
When the real-estate market is rising it is better to buy an
apartment than a house because the layout and quality of a house
has more personal taste where as apartments are more neutral
and easier to rent out/ sell. If the market is low then buying
a house is better - apartment prices can fall faster than houses
because houses include land which will retain its’ value.
In general, if a house or apartment is still being built there
will be no room for price negotiation, but the layout will likely
be better than older houses, which often have tatami mat floors
and small livingrooms. If it has been on the market for more
than 3 months after completion, and if the seller is a house
developer, you can more than likely negotiate a fair margin
because they want to sell it and borrow more money to start
a new project.
How long do properties in Tokyo
typically last?
Apartment buildings normally last for about 60 years before
being rebuilt or sold. In some cases, ownership of the land
and the apartment are separated.
Chi-Jo-Ken – the title for the apartment building not
including the land. In this case the building owner is only
renting the land from the landowner for a contracted period
of time. The contracted period for renting the land is typically
between 40~60 years after which the land eventually goes back
to the landowner.
Sho-Yu-Ken - the title for the land and the building.
Additional Monthly Fees for Apartments
In most apartments you will have to pay additional monthly fees
for car parks, building maintenance and restoration. You should
remember to add these fees on top of the monthly mortgage to
know what you monthly payment will be.
The Cost of Houses in Japan
The cost of house construction is typically about 25~30% of
the land value. For example, in the case of a brand new house
for sale for ¥100,000,000, the land is probably worth about
¥75,000,000 and the house ¥25,000,000. Unlike apartment
buildings, houses typically only last about 30 years, have no
additional monthly fees, and the car park size is included in
the overall building size.
Buying land and building your own house is a bit more expensive
than buying a brand new house on the market. Additional profit
for the land seller, architect, and construction company will
be built into the cost. You may only be able to find land, which
has only 3.5 ~4.0m of road width because the best pieces of
land are usually picked up by house developers. |
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The Application and Contract Procedure
1. Application Form - After you have chosen
a property you will fill out an application form (Kaitsuke Shomei)
2. Signing the Contract - Once the bank has given pre-approval
for the loan and both parties have agreed on the price and closing
date for the property, you will sign the contract before the
banks will finally approve to lend you money for that particular
property. While the bank is assessing the property, it will
be held and taken off the market from other interested buyers
(this takes about 1~1.5 months). At this time, the bank requires
some documents about the property, which you should have your
agent arrange for you.
The contract process usually takes about 2 hours.
The contract will have a clause saying that you are applying
for a mortgage of a certain amount, from a particular bank with
a proposed approval date. If, for some reason, the mortgage
is not approved the contract will be terminated.
DownPayment
On the day of the contract, you will give
a cheque to the seller, (about 10% of the agreed
price) as a down payment (This will come back to you in the
event that the bank will not lend you the money), and the seller
will issue a receipt for payment.
If you cancel after the signing of the contract other than for
reasons of mortgage failure this money will not come back.
If the seller cancels the contract you will get back double
the down payment.
Stamp (Hanko)
You would be better to have an official
stamp (jitsu-in) to sign the contract. This official stamp is
like a signature for signing contracts. You can have the stamp
made at any Hanko (stamp) shop. It is a one-of-a-kind original
stamp and it will take about a week to make. After you make
the stamp you will have to go the ward office to register it.
After you have registered the stamp the ward office will give
you a card with your stamp number. Just bring the card to the
ward office and they will issue the stamp certificate (inkan
shoumei). |
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Closing
After the mortgage has been approved you
will exchange keys and the title at the bank and the final settlement
will be transferred to the sellers bank account along with the
other necessary fees:
Notary’s fee - this is usually about ¥50,000~¥200,000
depending on the property
Registration license Tax - this is usually about 1% of the Building
and Land Standard Asset value, which will be paid to the tax
office via the notary.
Agents Fee - the standard agent’s fee is about 3.15% plus
a fee of ¥63,000
Fire Insurance – you will probably want to get fire insurance
from this date also.
A notary will be present either designated by the bank or by
you. The notary will go to the tax office that day and change
the name of the right. The tax office will change the name of
the householder within about 2 weeks.
On this day you will also split the cost of the Annual fixed
property and city tax with the seller.
After you move into your new home you will have to pay a one-time
Purchase tax bill from the tax office. Where as the Annual fixed
property and city tax will come every year.
Stamp Fees
You will also have to pay the stamp tax
according to stamp used on the contract. See Purchase Fees >> |
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