How to buy a property in Japan

For a foreigner, buying a property in Japan can be a confusing, difficult and frustrating experience if you don't know how to approach it.

General advice for people looking to purchase property in Japan

The type of place you purchase will depend on the reasons why you want to purchase a property. I recommend taking a pen and writing down all the reasons you can think of as to why you wish to purchase a property. This will help you to better understand your own reasoning behind your decision to buy or not to buy.

You should ask yourself two important questions1) do I want an investment property?  OR2) do I want to live in it?

Your answer to these questions will influence your decision on what type of property you purchase. If you are purchasing because you want to live in it and stay a while, you have more options than if you looking to purchase an investment property. If you intend to live in the property for a long time, you will be saving on the rent you would have been paying anyway on a rental property so the decision to buy in many respects  is a lot easier. If you intend to live in Japan for more than 5 years I generally recommend purchasing a property as opposed to renting.

There are personal and market considerations. If you are going to live in it, make sure you live in a place which is suitable now and for the future. If your job is likely to change, make sure you can rent it out or easily sell it. In terms of location this will obviously differ from person to person. For example, one person may want to live in Yokohama near sports facilities while someone else may want to live near Roppongi so they can enjoy the night life. Others may just want something cheap to live in.

You don't have the safety blanket of knowing that you are saving on rent if you are only purchasing the property as an investment, so the risk is greater. If you are looking for an investment place and think the property is not going to go up in value then you are better off not purchasing. A simple question to ask yourself is "Can I get a better return than the cost of the loan?". Last year there were some increases in property prices, making it more difficult to achieve positive yield (positive yield means you are making more money from renting your property out compared to the total of your other costs). If one is buying then a longer term commitment is required, so it could be a costly mistake if it doesn't suit your purposes.

Is there any law against foreigners buying houses/apartments in Japan?

There is no law or legal restriction against foreigners buying a property in Japan, either as a non-resident or resident. The biggest problem for foreigners buying property in Japan is getting the loan. If you have been a resident of Japan for some time (at least 2-3 years) it helps with the loan application. If you have a stable income and have been at the same company for at least three years your chances of getting a loan dramatically increase. Those who are married to a Japanese person will also find it easier than other to purchase a property because they have the spouse visa.

It's important to note that tax treatment is different depending on who purchases the property.

How do non-residents of Japan go about purchasing a property?

If you are a non-resident it is necessary to set up a special purpose company through which their real estate properties are held. This used to be done through a Yugen Gaisha (or YK) which are now obsolete. There are several companies you can use which are known as special purpose vehicles for holding real-estate. The costs involved in doing this differs depending on the structure; up to 1/2 million yen for simple purchases and more for complex ones. If you are a resident of Japan it will usually not be necessary for you to do this.