10 steps to buying in Japan – focusing on the ski resort of Niseko
Buying a property in Japan is pretty straightforward, even for foreigners. Unlike other Asian countries, ownership is freehold for both locals and foreigners alike. Anyone with the money to invest is welcome to their very own prized real estate asset in this economic giant, in fact, Japan is the worlds' third-biggest economy. Be warned though, the whole process entails tons of legwork. This guide, however, is an attempt to make the normally tedious procedure a little more convenient and efficient.
As indicated, there are no legal barriers to purchase a property in Japan. Non-citizens and non-residents alike can make property investments in the country but to make things easier, it will be prudent for expats to conduct a strong research to ensure that a sound investment is made. We will also endeavour to answer the key concerns such as what, where and when to buy. It is also important to understand that although it may be possible to get finance in Tokyo or Osaka, banks do not lend to foreigners in Niseko, and also very rarely to locals as well there.
2. Money Issues
Buyers also need to know that buying up a property in Niseko, Japan will require a ready access to cash. That’s because apart from the total purchase cost, there are other taxes and fees to be covered which include 8% for purchase tax (this is normally included in the purchase price of the property) and then between 1-3% of the purchase price which covers the miscellaneous fees such as lawyers and other closing costs. There will also be estate agency fees that are normally up to 3% of purchase price add-on as well. So it is important to make sure there is a stable source of funds prior to starting the purchase process.
3. Law and Language Concerns
To navigate effectively during the entire procedure of making the property investment, contracting the services of a lawyer and a real estate agent is advisable. By engaging both of these you can be ensured a hassle-free deal, safe in the knowledge that they will between them translate the information and ensure that the purchase is fully above board.
4. Viewing and Comparing Properties
Once the question of what kind of property to buy has been established, the next step is to research and shop around so you can compare and assess the market. It is always best to visit the chosen property locations as there is nothing like seeing and feeling first hand the properties and layouts in order to get a real feel. It is important that you take note of recent prices for your targeted market, compare which way the growth is for capital appreciation as well as rental, this should provide valuable information in getting the best deals. Remember there are places in Japan where property prices have not risen in many years and in some cases even dropped in value, so it is important to be aware of this.
5. Application to Purchase (Reservation Agreement)
In Japan, the sale of property is officially set in motion with the signing of the Application to Purchase or Letter of Intent (Reservation Agreement), which also requires payment of ¥100,000 - ¥500,000(roughly $1000-$5,000) – with Snow Dog Village this is refundable for 21days however with most developers and estate agents this is non refundable. Once approved, the buyer then pays the deposit fee of 10% of the purchase price.
6. Explanation of Important Matters
Property sellers in Japan are mandated by law to supply buyers a comprehensive document that will contain all the important details for the buyer to make an informed purchase decision. The purpose of the document is for buyers to have a clear understanding of the purchase agreement draft before finalising the deal. With this procedure in place, the likelihood of legal disputes following a sale deal is reduced considerably.
7. Purchase Agreement
If the document above is to the buyer's satisfaction, then it is time to conclude the deal. This is done by signing the Purchase Agreement which includes what taxes are payable. In some cases, this can be deducted to the property cost. This is applicable if the sale took place mid-year, in which case the seller will be responsible for half of the tax dues. The buyer will now require to have the remaining cash available to conclude the investment, which will need to include the miscellaneous amounts as in point 2.
8. Review of the Property
With the deal about to wrap up, the next thing to do is the inspection of the property. It goes without saying that a careful review of the state and quality of the property is must as walking back from the agreement is nearly impossible once the transaction has been sealed. This is to ensure the property is indeed in tip-top shape.
9. Final Payment and Register Property
Having ascertained that everything is in order, it is then safe to make the final payment. In this respect, the buyer is advised to have a legal scrivener on hand. This is the person who will facilitate the legal transfer of the registration of ownership from the seller to the buyer, acting on behalf of the seller. The legal scrivener will also safeguard the buyer from any form of unexpected mortgages or other third-party encumbrances on the property.
10. Handover and Moving In
Now all contracts are settled and title deed transferred the property is now yours to move in or rent out. You will need, however, to bear in mind that it is mandatory to file taxes in Japan a year after the close of the deal.
I hope the steps outlined above help make clear that investing in the Japanese property market is relatively easy, especially when compared to other Asian countries, for starters most properties are freehold ownership for locals and foreigners alike. The Japanese property market can prove to be extremely rewarding. In the past year, the country’s real estate industry has been on a steady growth trajectory and with the 2020 Tokyo Olympics approaching fast, a sure-fire stimulant, the case of the market providing investment dividends further gains traction.
Niseko, where we have developed Snow Dog Village, has broken the mould in terms of investment opportunity, property prices rose by 25% last year and are forecasted for continued strong growth. Last year alone in Niseko there was nearly 1B $USD of real estate transactions, which also shows what a healthy market this is. There is no question it is a ripe time to invest in the beautiful ski town of Niseko Village.