How to Buy a House in Japan as a Foreigner

It is possible for foreign individuals to acquire a home in Japan. This endeavor involves navigating a distinct set of procedures and considerations. This guide provides a comprehensive overview of the necessary steps and requirements for foreign individuals looking to purchase property in Japan.

Eligibility and Initial Requirements

Foreign individuals generally face no legal restrictions on property ownership in Japan. Non-citizens can own land and buildings outright, similar to Japanese nationals. While a specific visa type, such as permanent residency, is not a prerequisite for property purchase, a stable long-term visa can be beneficial for securing a mortgage.

While property ownership does not directly grant visa status, a valid visa or residency status is necessary for living in Japan and engaging in financial transactions. The legal framework distinguishes between freehold and leasehold land. Freehold (shoyuken) is the most common type for residential houses, granting full ownership rights to the land and any structures on it. Leasehold, less common for detached houses, involves leasing the land for a specific period, with ownership of the building itself.

Before initiating a property search, gathering essential documents is advisable. A valid passport is required for identification. If residing in Japan, a residence card (zairyu card) is necessary. For legal and financial procedures, such as property registration or opening a bank account, foreign individuals may need to register a personal seal, known as an inkan, at their local ward office, though a signature may suffice in some instances.

Financing Your Purchase

Securing financing is a primary consideration for purchasing property in Japan. Japanese banks offer mortgages to foreign residents, though eligibility criteria are more stringent than for Japanese citizens. Many major Japanese banks require applicants to hold permanent residency (eijuken) or possess a spouse who is a Japanese national or permanent resident. Some banks consider long-term visa holders with stable employment in Japan, requiring at least three years of continuous employment and a minimum income level.

Down payment requirements for mortgages in Japan generally range from 10% to 20% of the property’s purchase price. International banks operating in Japan offer more flexible terms for foreign borrowers who do not meet the strict criteria of local banks. These banks cater to non-residents or those without permanent residency, often requiring a larger down payment and having higher interest rates.

Beyond the purchase price and down payment, associated costs are incurred during a property transaction. Real estate agent commissions are 3% of the property price plus ¥60,000, plus consumption tax. Registration fees, including registration tax (a percentage of the property’s assessed value) and judicial scrivener fees, are paid to register new ownership at the Legal Affairs Bureau. Stamp duty, a tax on the sales contract, varies based on the contract value.

Property acquisition tax is a one-time cost, 3% for residential land and 3% for residential buildings. Loan arrangement fees and mortgage insurance premiums apply if a mortgage is secured. Ongoing costs include fixed asset tax and city planning tax, paid annually to the local municipality, based on the property’s assessed value. Currency exchange rate fluctuations present a financial risk for buyers using foreign funds, as a sudden unfavorable shift could increase the effective cost of the property or mortgage repayments.

Finding a Property and Due Diligence

Engaging with a reputable real estate agent is common for finding a property in Japan. Agents play an important role in the property market, facilitating searches, negotiations, and legal procedures. Seek agents with experience working with foreign clients, as they can provide assistance with language barriers and explain nuances of the Japanese real estate system. Property listings are widely available through online portals and agent networks.

Detached houses (ikkodate) are a popular residential property type in Japan. Key documents include the property registry certificate (tochibo), which details the land and building registration information, and floor plans. Property viewings assess the condition, surrounding environment, and accessibility.

Due diligence is a necessary step before making an offer on a property. Building inspections, conducted by qualified architects or structural engineers, assess structural integrity and identify defects. A professional inspection provides valuable insight into the property’s condition, especially for older structures.

Legal and zoning checks are also part of the due diligence process. These checks confirm the property adheres to local zoning regulations and building codes. They also identify easements, rights-of-way, or other restrictions affecting the property’s use or future development.

Completing the Transaction

The process of acquiring a property begins with submitting a purchase application (konyu moshikomi sho) to the seller, accompanied by an earnest money deposit (tetsukekin). This deposit, typically 5% to 10% of the purchase price, is applied towards the total purchase price. Negotiation regarding the price and terms occurs at this stage, facilitated by the real estate agent.

Before the formal sales contract is signed, the real estate agent is legally obligated to provide an “Important Matters Explanation” (Juyo Jiko Setsumeisho). This document, which must be explained by a licensed real estate professional, discloses all information about the property. It covers legal restrictions, zoning, property boundaries, utility connections, and any known defects or issues.

Upon mutual agreement, the Sales and Purchase Agreement (Baibai Keiyakusho) is signed by both the buyer and seller. At this time, the remainder of the down payment is made. The real estate agent facilitates this signing, and a judicial scrivener (shiho shoshi) may be present. This agreement outlines the terms of the sale, including the final price, payment schedule, and conditions for transfer of ownership.

If a mortgage is involved, the final stages of loan approval and fund transfer occur after the sales contract is signed. The bank verifies all conditions are met and prepares for the disbursement of funds. On the closing day, the final payment for the property is made, and the physical handover of keys occurs. This event often takes place at the bank or a legal office, with all parties present, including the buyer, seller, real estate agents, and the judicial scrivener.

The final and crucial step in securing ownership is property registration (toki). The judicial scrivener handles this process, submitting the necessary documents to the Legal Affairs Bureau (Homukyoku) to formally record the change of ownership. This legal registration legally transfers the title of the property to the buyer, making the ownership publicly recognized. While not directly related to property ownership, individuals who change their primary residence as a result of the purchase are required to update their address on their residence card with the local authorities.