LINC CEO and founder Shinichi Kawamura
executive impact

Buying a home in Japan: What you should consider

23 Comments

With the dollar currently so strong against the yen, many people abroad are looking at the Japanese real estate market as an attractive investment.

But understanding the basics of buying a home in Japan is important before making a decision. Prospective buyers living overseas need to be aware of real estate market trends, interest rates, financing options based on their visa status, consulting with banks to find out how much they can borrow, tax benefits and tax deductions. 

One company which provides assistance to people living overseas and foreign residents in Japan, who are interested in buying a home in Japan is LINC Inc which has partnerships with various professionals such as architects, lawyers, judicial and administrative scriveners.

Japan Today hears more from LINC CEO and founder Shinichi Kawamura.

What is your background?

My background is primarily in business consulting and real estate. I have also worked for marketing firms abroad. After graduating from Japanese university, I worked for Sekisui House, the largest construction company in Japan. Then I went to the UK to study for an MBA.

After coming back to Japan, I worked for a consulting company providing consulting services mainly to construction and real estate companies. I established LINC in February 2018.

What services does LINC offer?

Real estate is our main business. We provide support for registration and basically all other services related to real estate. In addition, we offer architectural design and remodeling services.

How many in your team? Are they bilingual?

We are a team of four. And all four of us can speak English.

How do you market the company?  

Basically, the online seminars held by GPlusMedia are opportunities for us to get in touch with our clients. We only target foreigners who are living or planning to live in Japan. Therefore, since our target population is not that large, we do not engage in mass marketing. Referrals and word of mouth are our other major marketing tools.

How has the pandemic affected LINC’s business?

The pandemic very much affected our business. For the past three years, property owners were reluctant to sell their own properties, and there was a period of time when prospective buyers wanted to buy property but could not. Then, demand was there but supply was not, and real estate prices continued to rise.

Unfortunately, in addition to the pandemic, there was another factor that made the real estate market even more challenging. In Japan, there was what we call the "wood shock," a sharp rise in the price of lumber. This increased the value of buildings, including detached homes.

This period was a very difficult time for prospective buyers, as there were few properties on the market that they wanted to buy, and even if there were, they were too expensive to purchase.

Do you get a lot of inquiries from foreigners overseas and in Japan who wish to buy property?

Yes, we do get a lot of inquiries. Recently, we have been receiving more inquiries from foreigners living in Japan. Perhaps this is because COVID-19 has settled down and Japan has become more accepting of foreigners.

What are prospective buyers' main concerns?  

One of the most frequent inquiries is whether they can get a bank loan. Currently, Japanese bank loan interest rates are very low, in the low 0.5% range for variable interest rates, for example. Many foreigners are thinking of taking out a loan at this time.

However, in order to obtain a loan from a Japanese bank, you must have a permanent residence or working visa in Japan. You must also have lived in Japan for at least one year (there are exceptions). You have a high probability of getting a loan if you have worked and lived in Japan for at least three years and at least five years, respectively.

With the dollar strong, is now a good time for foreigners overseas to buy property in Japan?

Of course. It is a prerequisite that you buy a place where the real estate you are buying is of high value, but now is a good time for foreigners to buy real estate in Japan, especially if they have cash abroad.

One thing to note is that foreigners who do not have permanent residency status are basically required to pay 20% of the real estate value in cash when taking out a loan in Japan. Therefore, many people pay this 20% in cash with their savings abroad.

What are some things that surprise foreigners wanting to buy property in Japan, that they didn’t know before you told them?

One thing in particular that surprises them is the lack of price negotiation. Occasionally, they may make an offer at a very low price relative to the indicated price. However, this rarely works in Japan. There is no culture of repeatedly haggling over the price, as in auctions. In many cases in Japan, if you offer a very low amount against the indicated price, the property owner will refrain from selling to you. I believe this is because Japan has a tradition of valuing civility and wabisabi more than business. Japanese people may feel that they do not want people who are not like themselves to live in the house they are selling. 

This is gradually changing these days, but the tendency still remains.

In webinars you have spoken about **akiya (abandoned vacant homes). What are the main risks that potential buyers need to consider before such properties?**

Buying an akiya is very difficult. In some cases, it is more expensive than buying a regular house because of the maintenance and remodeling that is needed. In addition, the average real estate agent will not deal with the house because of the special skills required to survey the house.

Another point is that since most vacant houses are older, loans cannot be used. Therefore, it is necessary to pay in cash. Because of this need for special information, it is necessary to consult with a company that offers services such as "vacation rentals".

For more information on LINC, visit https://lincon.co.jp/

© Japan Today

©2022 GPlusMedia Inc.

23 Comments
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Just back from Kyushu and saw multiple listings for large traditional houses with even 10 rooms for 15 million yen or less near Nakatsu. Seems like it would be fun. A realtor also mentioned if you cannot get a bank mortgage that there are higher rate private loans but this article doesn’t address that.

3 ( +4 / -1 )

Mr Kawamura

The English on your website is pretty bad. I would work on that since you seem to be catering to foreign clientele.

5 ( +7 / -2 )

OK so how does this work

However, in order to obtain a loan from a Japanese bank, you must have a permanent residence or working visa in Japan. You must also have lived in Japan for at least one year (there are exceptions). You have a high probability of getting a loan if you have worked and lived in Japan for at least three years and at least five years, respectively.

We know we can get a mortgage if we live in Japan, but if you DON'T live in Japan, then you can't. as it mentions " must have a permanent residence or working visa in Japan. You must also have lived in Japan for at least one year (there are exceptions). You have a high probability of getting a loan if you have worked and lived in Japan for at least three years and at least five years, respectively." So what are the exceptions?

Pay cash outright?

Be super rich?

5 ( +7 / -2 )

What you should consider are: Earthquakes. Tsunami. Floods. North Korea bombs. Things like this before buying a home in Japan.

4 ( +7 / -3 )

I would say do not buy home unless you know you will not leave Japan because you will immediately lose money on your purchase. Of course, unless some large corporations wants to buy your land some day.

0 ( +5 / -5 )

In a country with literally millions of empty properties, you should be choosy as a buyer.

My other advice is do not assume all buildings in Japan have no insulation and rubbish windows. Yes, there are many old houses like that, and some not so old ones, but unless you are heavily budget constrained, no-one is forcing you to live in one. The government through Flat35 will lend you money at 0.5% to build an extremely warm house if you want one. There are many builders who will do it for you.

-1 ( +2 / -3 )

In my understanding to get a mortgage in Japan is rather difficult for example in the US you can get a mortgage with a job offer letter but in Japan at least 1 or more years as a full time employee is necessary, and the loans are non-recourse meaning you can’t just give the bank the keys and walk away. This suggests to me that banks think that housing as collateral is not sufficient and that the price or value will inevitably fall. On the other hand there is no place like home.

0 ( +3 / -3 )

However, in order to obtain a loan from a Japanese bank, you must have a permanent residence or working visa in Japan.

I am pretty sure that this is an English error. To get a loan in Japan you need Permanent Residence Status, not a permanent residence.

I am no longer in the market, but WAY back 20 years ago when the Mrs. and I were purchasing, it was her Japanese Nationality (and quite frankly income) that mattered. I was viewed as nothing more than a resident of the property.

In fact, the bank made the reality agency take my name off the contract as I was not included in the loan.

I do not believe that much has changed in the interim. While there may be other countries that will lend non-resident aliens money to purchase rental or vacation properties (or homes), Japan is not one of them to the best of my knowledge.

Now that I am a PR (and have a job with a 1st Tier Nikkei SE company as a non-contract employee), the banks and real estate agencies won't stop sending me fliers asking me if I wouldn't be interested in a loan/new home/vacation home/ you name it.

I know another ex-pat w/ PR at the same firm who was able to obtain very favorable terms on a home loan. He said they were almost throwing the money at him.

So the most important things in obtaining a loan are:

Permanent Residence Status (In my opinion, most banks will shy away from a work permit visa that requires regular renewal, but I could be mistaken.)

Employment Status - Even more than income level, income stability is the key. Banks are more likely to lend to a non-contract employee of an established company.

5 ( +5 / -0 )

I've found out there are lots of taxes and costs we didnt investigate, body corporate rates doubled over 5 years,issues like flooding, landslides etc all important as well.

Not sure about the "Japanese dont haggle " idea....depends on the seller.

Broke companies, people owing taxes and the dead all seem to haggle.

2 ( +4 / -2 )

kohakuebisu

Sep. 27 10:38 am JST

In a country with literally millions of empty properties, you should be choosy as a buyer

I like this as it comes up regularly!

Yep millions of empty homes!

So does the USA, Canada, to a lesser extent Australia, these homes and towns are called ghost towns and Japan has plenty in the countryside.

My children's grandparents have a nice big house 100 tsubo property 1 hour from Tokyo right near the Tomei highway, a view of Mount Fuji.

Sounds great, right? Well they don't live there.

They are in Tokyo living with their son ( my ex-wife's brother) why?

Because at 98 and 89 neither can drive, the only bus passes once an hour and the closest store is 30 minutes away. So the house is empty except when my adult children use it as a vacation spot with their friends.

In the area surrounding their house there are dozens more house empty.

You can buy them but when you are old what are you going to do, if you have children the closest school is 45 minutes by car. ( 30 plus years ago there was a local school but it closed a long time ago).

So saying there are millions of abandoned house and those places being practically or worth it are very different things.

The town my father was born in back in Canada is gone even the roads are now covered with trees it once had 4 primary school 4 highschools and a population in the tens of thousands, but the mines and mills closed people left.

This is the same in Japan.

Any actually good location you will not find cheap abandoned houses

-3 ( +4 / -7 )

Most prefectures now have "Housing Banks" with properties for sale and sometimes for rent.

-2 ( +1 / -3 )

NumanSep. 27  10:24 am JST

I would say do not buy home unless you know you will not leave Japan because you will immediately lose money on your purchase. Of course, unless some large corporations wants to buy your land some day.

Not necessarily true. I made a very healthy profit on my first house after living in it for 10 years. Location location location.

-2 ( +1 / -3 )

I bought an 18 year old house in Tokyo, needed some work, mostly cosmetic, 6 minutes from the metro station, 7 minutes from a JR station, 7 from a monorail station and 2 min from a tram stop.

In 2 years and having only done the needed exterior maintenance the value has gone up by over ¥10 million. (Exterior needed siding cleaned, new caulking, painting and the roof cost ¥1.5 million) so after cost the actual resale value is now ¥8.5 million more than I paid.

The rule location location location still applies in Japan.

We checked the laws and rules, located in an area permitting business and residential, raises the value, close to multiple stations value up, road size not under 4 metres wide but not over 5 metres or so again better value because max building size means less chance some company will build a 14 plus floor apartment building next to you.

So the triple value, you can live on the 2 top floors have a business on the ground floor, close to the station, little chance of a giant building being built next door.(also plenty of stores restaurants, etc.. within walking distance of 5 to 10 minutes), means we get a lot of concrete offers for our place but no point in selling as we cannot get another place similar at a reasonable price.

It may sound crazy but an 18 to 20 tsubo property with a 3 floor house in Tokyo near a station is a better value than 150 tsubo with a house twice the size outside a major city needing a car to get most places.

-4 ( +3 / -7 )

Re Mortgages from Japanese banks. I am not PR but married to a local, just on a work visa that my company renews but I have been working for them for over a decade and it's a very good job. I am the sole bread winner in our home and have been granted 2 mortgages at the usual competitive rates from Japanese banks, so they do have flexibility but my marriage status helped I'm sure.

I get way more living space for what I pay a month compared to the equivalent cost of rent so for me it was a no brainer.

1 ( +2 / -1 )

An expert on very basic information, and how to blindly follow Japanese house-buying traditions.

We haggled out house down about 5 million yen. The fudousan said she actually enjoyed it.

1 ( +2 / -1 )

In a country with literally millions of empty properties, you should be choosy as a buyer.

In a country with incredibly obtuse inheritance laws, some of those empty properties are empty because it literally requires everyone related to the inheritance to sign off on a sale, or to rent it, or even do maintenance.

A friend 'inherited' his grandfather's house and decided to sell it; on the title are 22 people, some deceased, and he needed all 22 to sign off with the sale. Of the living, they live everywhere from Hokkaido to Okinawa to the US and Europe. And he hadn't met some of them, ever. So, his house sits empty and abandoned.

He doesn't even both to pay property taxes on it.

So, yes, with eight million abandoned homes, you should be choosy as a buyer. But those homes aren't on the market.

4 ( +4 / -0 )

@abe234 yes, pay 100% cash is the option. It happens

0 ( +0 / -0 )

When I talked to my bank they pushed the low but floating rate and I ultimately just kept renting. If the BOJ raises interest rates there is gonna be a lot of pain for those who took out max loans with floating interest rates. If you have done so you may consider refinancing now with bit higher fixed rate.

2 ( +2 / -0 )

I haggled mine from 5.2 to 5. The odd 0.2 was the indicated amount of how much the seller would give. He probably just wanted 5 to begin with. I was happy with that too. No need to life too difficult over anything after a decimal point...

1 ( +1 / -0 )

You need PR to get a mortgage without a guarantor, assuming you will pass getting life insurance (I know senior executives with a disability who were discriminated against)

You can't get PR unless you've lived in Japan for a certain period and meet certain criteria.

Trying to adapt the Anglosphere obsession of owning investment properties is a non starter here, which is a good thing. The keiretsu companies pretty much have the market sewn up anyway in the big cities at least.

A house isn't a commodity, it's somewhere for a family to live.

-1 ( +0 / -1 )

What you should consider is NOT buying any accommodation anywhere in Japan. It would be a terrible investment. Property hasn’t gone up in value for many, many decades since the bubble burst in 1989/90, and the Japanese economy is in a puff flimsy state.

-1 ( +0 / -1 )

The thing this article doesn’t mention is, there are no returns on property in Japan. Buying a new home is like buying a new car. It depreciated by 10% as soon as you drive it of the showroom (move in) and continues to depreciate over the following years.

0 ( +0 / -0 )

If it's in the right location property in Japan is a good investment. My house in Hokkaido (8,000 tsubo land with mountain stream running thru it which I've owned for twelve years) is near the entrance of what will be Japan's newest national park in the Hidaka Mountains. According to my realtor it's more than doubled in value.

0 ( +0 / -0 )

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