Buying Guide: Japan

Simply mentioning Japan evokes imagery of beautifully crafted temples, geisha, futuristic buildings, kimonos, ninjas, and stretches of rice fields. Nothing beats the uniqueness of the charm this spectacular country has to offer.

There are endless incentives for buying in Japan. Those visiting the country can find enjoyment in the fast-paced lifestyle and culture of Tokyo and Osaka, the country’s rural beauty near the coast, and the intriguing and respectful ways of the Japanese people.

As the economy recovers from the earthquake/tsunami double hit, the globe’s leading experts point to Japan’s status as a safe haven thanks to its comparatively steady currency. Real estate in Tokyo offers superb investment opportunities as property prices have come down considerably, with interest rates at their lowest after years of deflation. In addition to the financial advantages, the rights of ownership are solid, the quality of construction shows an outstanding superiority, and the purchasing procedure is plain and transparent.

Economy
Based on 2009 estimates, Japan’s inflation rate is currently around 1.1 percent. GDP (official exchange rate) is $5.46tr (2010 est.); GDP (purchasing power parity) is $4.31tr (2010 est.) and real GDP growth rate stands at around 3.9 percent (2010 est.)

Japan is one of the largest economies in the world and, at the last count, stood in third place after the US and China. As Japan was not excessively exposed to derivative instruments relating to sub-prime mortgages it managed to withstand the global credit crunch better than its counterparts. Government proposals suggested the increase of exports with the help of free trade agreements and opening the services and agricultural sectors to foreign competition in order to restructure the economy. Key economic challenges for Japan are its unrelenting deflation, an ageing and shrinking population, sovereign debt which exceeds 200 percent GDP, and its dependence on exports for growth.

COUNTRY OVERVIEW

Full name
State of Japan

Population
127.9 million

Currency
Japanese Yen (JPY)

Capital city
Tokyo

Major cities
Yokohama, Osaka, Okinawa

Language
Japanese

Climate
Japan’s climate varies from region to region but has four distinct seasons. Winter lasts from December to February, spring begins in March and stretches through to May, the summer months are June to August, while autumn lasts for three months until September. With an average yearly temperature of around 16oC for central Tokyo, the winter months do not bring extreme weather conditions. January is the coldest but also driest month. June is the wettest, while August, with a 30oC average, is the hottest month. Japan as a whole ranges from tropical temperatures in the south to cooler ones in the north.

Location Japan is an island nation in eastern Asia, east of the Korean peninsula. The Philippines and East China Seas are to the south, with the Pacific Ocean to the northeast.

PROPERTY ADVICE

Restrictions
Acquiring property in Japan is possible for foreigners from any country and of any nationality, even if they do not hold a permanent residence, provided they can procure their own financing. Although foreign individuals and companies planning to purchase real estate in Japan will not face any legal restrictions there are some minor impediments concerning bank loans. Usually mortgage loans depend on a person’s residency status. Foreigners who stay in Japan over 90 days require an alien registration card which can be acquired from the local municipal office. International investors on a three month visitor visa are not eligible, while those on a one or three year work visa can apply but may struggle to secure financing. Japanese lenders in the past have demonstrated their preference for permanent residents. Repayment terms can be up to 30 to 35 years and the maximum amount borrowed up to five to seven times the annual income.

Forms of ownership
Land rights in Japan are dominated by two main types of properties: leasehold and freehold. The former is broken into two broad sub-categories, namely the rights to lease and surface rights.

“Surface rights” (Chijoken) are most frequently seen in apartment buildings. Land is leased but owners of the building continue to hold the right to sell and buy it if they like.

The “right to lease” option (Chinshakuken) requires owners of the property to get the land owner’s endorsement before subleasing or transferring. In addition, permission must be attained prior to rebuilding structural parts of the land. The “right to lease” type of ownership is usually found in detached houses rather than in apartment buildings.

Freehold (Shoyuken) still remains the most preferred and common method of land ownership in Japan as it provides absolute ownership of the building and the land. Within apartment buildings freehold ownership would divide each unit into apportioned land ownership relating to the land upon which the apartment has been built on. This is calculated as a ratio and is typically the individual apartment size relating to the entire size of all the units in the building, which means bigger flats or units get a higher proportion of land ownership.

How safe is it?
Viewed alongside other major world counrties, Japan has comparatively low crime levels for theft, burglary, mugging, and other petty crimes. As a whole it is considered a relatively trouble-free country where it is by-and-large safe for men and women to travel on public transport or take a walk at night without fearing for their safety.

Certain areas including the Roppongi entertainment district in Tokyo are seen as higher risk areas and this district, just like any other major city, has reported higher crime rates.

The purchasing of property in Japan is generally considered a safe investment, particularly as buyers are protected by tightly upheld legal frameworks.

Mortgages
Home mortgage costs in Japan are decreasing and now stand at the lowest rate since 2009. Experts believe the recession discourages borrowers and forces standard government bond rates to stay low. The country’s 10-year fixed mortgage rate is currently at 3.75 percent at Japan’s biggest listed bank, the Bank of Tokyo-Mitsubishi, and at Resona Bank and Sumitomo Mitsui Banking Corporation.

Figures published at the end of September by the Japanese Ministry of Land, Infrastructure, Transport and Tourism showed that home loan costs decreased in September. The country’s 10-year government yields slumped for the sixth consecutive month and it is believed that mortgage rates could drop even further as lenders struggle to find borrowers.

The buying process
Look out for expatriate-friendly lenders as they know the needs of foreigners and understand the issues that need to be dealt with. Sorting out finances may put the buyer at an advantage as it is easier to start negotiations with potential sellers.

Once you have spoken to your bank and arranged finance, list the key requirements for your purchase by narrowing the budget, location, and level further. A down payment of around 10 to 20 percent is usually expected as security on the selected property. It is best to move through the buying process with the assistance of an English-speaking legal representative who will supervise any contracts and ensure that any fees that need to be paid are done so promptly, fairly, and accurately.

Choosing an area
There’s no question that Tokyo is a treasured cultural asset, and it comes as no revelation that the majority of international investors are drawn to the central areas of Tokyo every year.

Particular districts of interest are Azabu, Roppongi, Shinjuku, and Hiroo, where there is an abundance of properties, especially apartments, but prices are rather high. Prices drop just outside the central areas and there are more houses available for purchase. These can be found in Tsukishima, Kachidoki, Toyosu, Shibaura, Konan, and Odaiba.

Yet despite the fascination with Tokyo it is worth considering the many fantastic sights that the rest of Japan can offer potential property buyers. There are numerous areas within Japan that are bursting with fascinating sights to attract property seekers across each of the nation’s 47 diverse prefectures. Osaka and Kyoto in particular offer a magnificent range of buying opportunities.

Viewings
It is strongly encouraged to book in advance any viewings of prospective properties before making a purchase decision. Once a few shortlisted properties have been identified the estate agents will make the required arrangements for the buyer. In most cases international estate agents will even organise a schedule to arrange local transport, accommodation and flights to the location of the property.

Legal representation
It is extremely important to appoint an independent, Japanese and English-speaking solicitor to review all contracts that are to be signed. One of the biggest issues is that there is a lack of information available, and if at all it is in Japanese. Having legal representatives who know their way around the system will make the process more efficient and smooth.

Taxes
When buying a property in Japan it is usual that fees and taxes will accumulate to around five or six percent of the house price. The registration tax is around one percent of the standard taxable value. Stamp duty land tax for a house that costs between ¥50m to ¥100m will come to around ¥45,000 for the property contract while the mortgage contract comes to an estimated ¥60,000. For the same priced property, legal fees should not be above ¥100,000, while the acquisition tax is calculated by estimating the land value.

AREA GUIDE

Tokyo
Entrenched in a fascinating history, Tokyo’s humble beginnings can be traced all the way back to the 12th century. What started off as a small fishing village called Edo has now grown to become culturally and economically one of the biggest and most significant cities in the world. It is impossible not to feel the magic Tokyo has to offer to visitors and residents alike.

Situated in the Kanto region on the south-eastern side of the island of Honshu, Tokyo is the largest metropolitan area within the country, and is currently home to just under 13.2 million people. It is the abode of the Japanese Imperial family and their palace, and also the seat of Japan’s government.

As for real estate available, Omostesando and Aoyama are particularly popular areas but are rarer to see on the market. Neighbourhoods such as Hiroo, Shirokane and Azabu-Juban offer good international schools and idyllic residential streets, and are a high-quality choice for families. Other popular residential districts include Yoyogi, Ebisu, Shinagawa, Kamiyacho, and Daikanyama.

Property prices in Tokyo are comparable with other major international cities. Now however, it is a better time to buy due to the amount of real estate on the market with reduced price tags. Two bedroom apartments of around 60m2 can start from around ¥40,000,000, while a large three bedroom house can cost as much as ¥200,000,000 depending on location.

Kyoto
The Kyoto property market is buzzing. It continues to maintain its standing as a cultural epicentre within the country thanks to its distinctive, delightful alleyways which provide a charming atmosphere. The UNESCO World Heritage sites scattered across the city make it interesting to visitors and residents alike.

Property here is not as pricey as in Tokyo and there is a range of properties available to cater for all types of home seekers including solo movers, families, or businessmen whose preference may be to live as close as possible to the city’s business centre.

Osaka
Osaka is located in the Kansai region and is the capital city of the Osaka prefecture. The place is bursting with shopping arcades, electronics, malls and retail shops and is generally known for its vast culinary offerings, which are as tasty as they are diverse
The district of Umeda will provide a hint of Tokyo without such a hectic atmosphere and has some luxurious apartments on offer. Tennoji and Namba are both located near the business, shopping and restaurant areas, while Shinsaibashi will appeal to younger professionals.

Meanwhile, Osaka serves as Japan’s economic centre and is one of the nations’ key media hubs, housing all five of the country’s national newspapers. Moreover, it plays a pivotal role in international shipping as the Port of Osaka deals with freight coming through the area for international and domestic purposes. Key corporations such as the Osaka Securities Exchange, Sanyo, Nomura Securities, and Panasonic are headquartered in Osaka. The busy Kansai International Airport is situated at the edge of the city.