How Foreigners Can Buy Real Estate in Japan

In recent years, with the backdrop of a weaker yen, there has been an increase in cases of foreign residents purchasing real estate in Japan. The purposes vary, including investment and personal use, and some people may have questions or concerns about how to make a purchase or what complex procedures may be involved.

This article outlines the steps, costs, and points to note for foreign residents looking to buy real estate in Japan. Let’s proceed with the procedures after clearing any doubts or concerns.

Can Foreigners Buy Real Estate in Japan?

There are no legal restrictions regarding the purchase of real estate in Japan by foreign residents. Furthermore, there are no limitations on land ownership rights, allowing foreign residents to buy real estate in Japan. However, note that taxes such as acquisition tax and fixed asset tax will be levied when purchasing real estate in Japan.

7 Things to Know About Buying Real Estate in Japan

When foreign residents buy real estate in Japan, the procedures and costs may differ from those for Japanese citizens. Below are seven points to check:

1. Real Estate Transactions and Information in Japan

To prevent transaction troubles, real estate companies mediate real estate sales in Japan. Property information can be searched online, mostly in Japanese. Some sites offer English or Chinese options, useful for those not comfortable with Japanese. 

For foreign residents, the required documents and remittance methods for purchasing real estate in Japan differ, so finding a real estate company with extensive experience in foreign transactions is reassuring.

2. Real Estate Purchase Procedure

The flow for foreign residents to buy real estate in Japan is as follows:

• Search for Real Estate: Find real estate that suits your purpose.
• View the Property and Submit a Purchase Intent Document: View the property and check the details. If decided, submit a purchase intent document.
• Confirm Payment Method: Discuss and decide on the payment method. If using a housing loan, proceed with the loan application procedures.
• Receive Explanation of Important Matters: Receive an explanation of the important matters explanation document, which outlines the property overview, rights relationships, and terms for contract cancellation.
• Conclude the Sales Contract: If there are no issues with the content of the important matters explanation document, conclude the contract. Typically, a deposit of about 10-20% of the property purchase price is paid at this time.
• Settlement and Registration: Settle the real estate purchase funds and perform the registration (recording the transfer of ownership in the national documents).
• Report to the Minister of Finance (for foreign nationals): Report the real estate purchase to the Ministry of Finance within 20 days after acquisition.

By understanding and following these steps, foreign residents can navigate the real estate purchasing process in Japan more smoothly.

3. Expenses Incurred When Purchasing Real Estate

When foreigners living abroad purchase real estate in Japan, the following costs are incurred:

Timing of Payment	Item	Details
1. At the time of contract	Stamp duty	Stamp fee affixed to the contract
1. At the time of contract	Earnest money	10-20% of the purchase price
2. At the time of loan application	Stamp duty	Stamp fee affixed to the loan contract
3. At the time of final payment	Remaining payment	Amount after deducting the earnest money from the purchase price
3. At the time of final payment	Costs related to housing loan	– Financing fee – Loan guarantee fee – Fire insurance premium
3. At the time of final payment	Pro-rated settlement money	– Property tax – Urban planning tax In case of an apartment: – Monthly fees paid to the management association, such as management fees and repair reserve funds – Neighborhood association fees
3. At the time of final payment	Brokerage fee	Fee paid to the real estate company
3. At the time of final payment	Registration fee	– Registration and license tax – Cost of ownership transfer registration and mortgage registration – Remuneration to the judicial scrivener
4. After purchasing real estate	Real estate acquisition tax	Tax related to real estate acquisition Note: A “Tax Payment Notice” (「納税通知書」) will be sent from each prefecture about 6 months to 1 year after purchasing real estate, and payment is made at a financial institution.

4. Documents to Prepare When Purchasing Real Estate

The necessary documents for purchasing real estate in Japan are as follows:

• Signature certificate

• Photo ID

• Copy of the registry (in the case of a corporation)

Please check with the management company of the property you wish to purchase as the required documents may vary depending on the desired real estate and nationality.

5. About Housing Loans

Many people use a “housing loan” when purchasing real estate, but it is difficult to get a loan from a Japanese financial institution if you do not have permanent residency in Japan. 

Consider using financial institutions in your home country that have branches in Japan, or foreign non-banks.

However, some domestic banks may be able to finance housing loans for foreigners who do not have permanent residency if certain conditions are met.

6. About Receiving the “Real Estate Title Deed” (「不動産権利書」)

When acquiring real estate, the “Real Estate Title Deed” is issued in about a week. Decide in advance whether to have this document mailed to your country of residence or managed by the real estate management company for smooth processing.

7. Deciding on a Tax Manager

After purchasing real estate, “Real Estate Acquisition Tax” and “Property Tax” payment slips are sent from the tax office, and you need to pay the taxes listed on the payment slips. Also, if you purchase real estate for investment, you must file a “final tax return” every year.

Since it is difficult to carry out such procedures from overseas, it is important to decide on a “tax manager” in Japan who can handle tax procedures on your behalf. 

If you do not have someone you can rely on in Japan, it is a good idea to consult the real estate management company managing the property.

 

Surge in Overseas Residents Establishing Asset Management Companies in Japan!

Overseas residents and foreign nationals are increasingly establishing “asset management companies” in Japan when purchasing real estate in the country. This popular real estate management method in recent years offers significant tax benefits.

What is an Asset Management Company?

An asset management company is a corporation established with the purpose of managing assets. Often referred to as a “private company,” it allows individuals to set up a company for their own benefit and manage it themselves.

While many establish these companies for tax savings on existing assets, there is a growing trend of setting up new asset management companies for real estate investment.

Benefits of Establishing an Asset Management Company

The main benefits of establishing an asset management company are as follows:

Benefit 1: Broad Range of Expenses

If you establish an asset management company and engage in real estate rental business, all costs used to generate revenue can be expensed. This range is significantly wider than personal management, allowing for the expensing of costs like corporate mobile phone bills, vehicle maintenance, housing allowances, meal expenses for meetings, executive life insurance premiums, and daily allowances for business trips.

Additionally, executive compensation and retirement benefits paid by the company to oneself can be treated as expenses, reducing the company’s profits and leading to corporate tax reductions. These payments are also subject to income and retirement income deductions, potentially lowering the amount of income tax.

Benefit 2: Eligibility for Social Insurance

Another benefit is the ability to enroll in government social insurance (health insurance and welfare pension insurance) when managing real estate as a corporation. This is particularly attractive for those planning to move to Japan in the future.

Benefit 3: Ability to Give Assets as Gifts During One’s Lifetime

When managing real estate as an individual, the income from the assets becomes personal assets. On the other hand, managing real estate as a corporation allows for the payment of salaries to spouses, children, and grandchildren, achieving the effect of giving assets as gifts during one’s lifetime.

Benefit 4: Smoother Inheritance Procedures

Establishing an asset management company for real estate management also makes inheritance procedures smoother. Selling the real estate to the corporation during one’s lifetime and converting it into cash or corporate shares as financial assets allows for more seamless division and inheritance.

Benefits of Using a Virtual Office When Establishing an Asset Management Company

For overseas residents and foreign nationals establishing an asset management company, using a “virtual office” is convenient. A virtual office, an office that doesn’t physically exist, significantly reduces costs compared to renting a property for office use.

Different operating companies offer different available features, so it’s advisable to carefully compare and consider multiple services. Some services provide support during company establishment, ensuring a more secure and smooth progression of procedures.

Summary

In Japan, anyone can purchase real estate regardless of nationality or residence. However, for overseas residents and foreign nationals, the procedures and costs differ. It’s important to prepare by confirming necessary documents and payment methods.

Consider utilizing a virtual office and establish an asset management company for more efficient and secure real estate management.

If you are interested in investing in moving to Japan, investing real estate in Japan or setting up asset management company, please contact us!