The real estate market in Tokyo is thriving, and this means that borrowing levels are low at around just 2-4%. If you do not have permanent Japanese residency status, (or Japanese spouse) then you mind find it difficult to secure a mortgage unless you have lived in Japan for over 5 years and have a permanent address. It also helps if you can speak Japanese and have a good, permanent job as this will show the bank that you have a steady income and are intending to live in Japan for some time. If you are only in Japan for a few years with your job, then you would be much better off renting a property, as it is unlikely a bank will grant you a mortgage.
Properties in Tokyo fall in to two main categories, apartments or houses. In central Tokyo you will find it almost impossible to buy a house, as most of the property in this area are apartment blocks. Further out into the suburbs there are more houses, and if you work in the city centre you can commute quite easily using the fast efficient train services. New properties tend to be the most expensive, so apartments and houses that are over 5 years old are normally more reasonably priced and represent a better investment overall, as new properties deprecate quite significantly in value after five years.
However if you are buying a property to rent out then you can charge a much higher premium for new properties, so in this case buying a new property does make sense, and apartments in key areas such as Omotesando, Akasaka and Aoyama are always in demand and represent solid investment potential. It is important to note that many Tokyo apartments include additional monthly fees for building car parking, maintenance and restoration, so don’t forget to check this before you agree any sale, and ensure you can afford it on top of the monthly mortgage payments.
In Tokyo the contracts will be signed before the mortgage is finally approved in most cases, so you will also need to ensure you have organised the downpayment fee cheque with the bank (10% of the agreed price), which must be handed to the seller upon signing the contracts. If your bank does not then come through with the mortgage for any reason this fee will be returned unpaid, however if you cancel for any other reason you will lose this money, and if the seller cancels they will have to pay double this fee back to you.
Other fees involved in real estate buying in Tokyo include the following:
- Notary’s Fee – this will depend on the property and can be anything between ¥50,000 to ¥200,000.
- Registration License Tax – this represent 1% of the total property asset value, and is sometimes included in the notary’s bill, as they would normally collect this tax and pay it in as part of their services.
- Agents Fee – the average agent fee for property transaction in Tokyo is around 3.15%, plus a one off fee of around ¥60,000.
- Fire Insurance – it is important to set up fire insurance as soon as you have a date for the handover, so that your property is covered from the moment you sign the agreement papers.
- Annual Fixed Property and City tax – this will be split down the middle and shared with the seller.
- Purchase tax and Stamp Tax – these are one off payment that will need to be paid to the tax office after you have completed the purchase.
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