Process of Buying Real Estate in Japan: Issues, Requirements and Basic Expenses
Editor’s Note: The article below is for basic informational purposes to get you started. If you are considering buying property in Japan, please consult one of the many advertising agents on RealEstate.co.jp for the specifics of your particular situation.
Analyze Your Needs
Here’s a checklist of things to consider if you plan to live in the property you’re hoping to buy:
1) Find out the types of charges and taxes you will have to pay, both at the time of purchase and while you own the property
2) Determine your maximum acceptable commuting time to work
3) Consider the relative advantages of living in central vs. outlying areas
4) Assess your lifestyle demands (shopping, access to entertainment and recreation areas, schools and so on) and the area’s overall environment
5) Figure out your minimum space requirements
6) Do you need parking space?
Discuss your requirements with your real estate agent, who will then select appropriate properties from the listings and provide you with descriptive materials. The agent should draw up an agreement to confirm his or her intermediation on your behalf.
Examine the Materials
Look over the materials you receive and discuss any matters you don’t fully understand with your agent. Please keep in mind that you will be responsible in the actual sale and purchase of the property.
Viewing the Property
While visiting a property with your agent, we recommend that you thoroughly examine the place and inspect the surrounding neighborhood. Be sure to inquire about environmental factors (traffic, noise, air quality, weather and so on) and about any upcoming changes such as new building construction.
Intent to Purchase
When you find a desirable property, formally declare your intent to purchase it prior to signing a purchase application and making application payments.
Explanation of Important Matters
Once you’ve declared your intention to purchase, you will be given a document called the “Explanation of Important Matters,” which describes matters of interest related to the property.
Sale and Purchase Agreement and Deposit Payment
Conclude the sale and purchase agreement after negotiations are finished and pay the specified deposit (in the event one is required). The following are required to formally conclude the agreement:
1) Your seal (a private seal is acceptable, or a signature with some form of identification is required if you do not have a registered seal)
2) A deposit (this is usually 10-20% of the purchase price)
3) A tax stamp
4) A payment (commission fee) to your intermediary; half of the standard commission is paid at this time
Formal settlement of the agreement takes place on a specified date after the seller has readied the property for delivery and financing arrangements have been made (if a loan is involved). Reconfirm the present state of the property and confirm the transfer of ownership. The following are required at the time of settlement:
1) Your seal (a private seal is acceptable, but a registered seal is required if a loan is involved)
2) Certification for your registered seal
3) A balance statement detailing credits and payments related to each party
4) Your certification of residency
5) A list of registration costs
6) A payment (commission fee) to your intermediary; the balance of the standard commission is paid at this time
If you do not have a seal, registered seal certification, or residence certification your agent can advise you about appropriate procedures for obtaining them.
Expenses Related to Purchasing Real Estate
Note: Consumption tax is included in the amount unless financing is secured from a source outside of Japan.
1) Various taxes (stamp duty, registration and license tax, real estate acquisition tax)
2) Judicial scrivener fees (property rights preservation and ownership transfer registration)
3) Real estate agent commission (3.15 percent of the purchase amount plus 63,000 yen). Example: 1,008,000 yen on a 30 million yen pre-owned condominium. The approximate additional expenses at the time of purchasing a 30 million yen pre-owned condominium will therefore be about 5-6 percent of the purchase price, along with adjustments for fixed assets tax, etc.
Normal monthly expenses for a condominium
1) Management fee; this varies widely per building from about 8,000 up to 100,000 yen
2) Building repairs charge reserve; this varies, but usually runs between 5,000 and 20,000 yen
3) Parking space fee; generally between 20,000 and 50,000 yen, plus consumption tax
Normal expenses paid yearly for a condominium
1) Fixed assets tax (see below)
2) City planning tax (see below)
Taxes Levied on Real Estate in Japan
Stamp duty: This takes the form of a stamp purchased for a stated amount and affixed to the agreement. Tax is to be paid when the agreement is executed and levied according to the purchase price (example: 15,000 yen for an amount up to 50 million yen).
Registration and license tax: This is levied to preserve and/or transfer property rights upon each standard assessment* of the land and building(s).
Real estate acquisition tax: This tax is levied when acquiring land and/or buildings according to the standard assessment* of the land and both new and pre-owned building(s).
1) Fixed assets tax: Local (ward, city or town) taxes are levied on the owner of the fixed asset(s) according to the standard assessment of the land and building(s).
2) City planning tax: This tax is applied on owners of real estate in urban areas to defray the costs of municipal maintenance, etc., and measured according to the standard assessment* of the land and building(s).