Japan: Guide to Buying Costs and Procedures

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Moderate roundtrip buying costs in Japan

How high are realtors’ and lawyers’ fees in Japan? What about other property purchase costs?

Process of buying property

There are no legal restrictions on foreigners owning real estate property in Japan.

Negotiations and private survey may begin once property has been chosen. It is important to hire the services of a real estate agent, who can also act as the buyer’s translator. An offer or a letter of intent, however, is not legally binding.

Before the deal, a Juyoujikou- Setsumeisho (similar to a Property Disclosure Statement or Seller's Real Property Disclosure Statement) is drafted by the real estate agent. The purchase contract is drafted once a deal is settled. After this, a 10% deposit is expected from the buyer before the contract date.

During closing, the title is transferred. Both parties should have certificates of their seal impressions. Stamps are obtained, and government fees and taxes are paid to register the title.

The last step is to pay the remaining balance.

The whole process of registering property has six procedures, which can be completed in around 14 days.

REAL PROPERTY ACQUISITION TAX (Local Tax)

Acquistion tax for purchase of land or houses between April 1, 2006 and March 31, 2009 is 3% of appraised value*. For purchase of residential land between Jan. ,1 2006 and Dec. 31, 2009, tax is imposed on 50% of the assessed value.

A deduction of JPY12,000,000 from the appraised value of the house is allowed when a new house, with floor space no more than 240 sq. m. and no less than 50 square meters (40 sq. m. for a rented apartment, etc.) is built for residential purposes.

If a residential house that is pursuant to this special deduction is built within three years of or one year before acquisition of the site, the tax levied on the appraised acquisition value of the site is reduced by 3% of JPY1,500,000 or 3% of the value of a site that has twice as much floor space (up to 200 sq. m.), whichever is higher.

A property is exempted from the acquistion tax if the appraised value is below the following amount:

Land: JPY100,000
New house: JPY230,000
Other houses: JPY120,000

*Appraisal Value: A value to calculate the fixed property tax on a property. Usually listed in tax register book. The value is unique and independent from actual costs to build or purchase the land. For cases of newly building, improving or making an enlargement to a property, a new value will be sought by referring to other existing values in vicinity and approved by a register of the authority. Generally, appraised value is 50-70% of construction cost for building property and around 70% of a purchasing price for the land property. For simplicity, we assume that the appraised value is equal to the purchase price.

Footnotes to transaction costs table

The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.

Currency:
Japan uses Japanese Yen. Exchange rate is at US$1 = JPY119.457 as of 20 October 2006.

Consumption Tax:
Consumption tax is levied on purchase of goods and services including transfer of buildings, both new and used. The current rate is 5% (4% national, 1% prefectural). Sellers are required to include the consumption tax in the sales price (thus, it is not included as transaction cost based on our definition). Sale or lease of land is tax-exempt.

Real Property Acquisition Tax (Local Tax):
Acquistion tax for purchase of land or houses between April 1, 2006 and March 31, 2009 is 3% of appraised value*. For purchase of residential land between Jan. ,1 2006 and Dec. 31, 2009, tax is imposed on 50% of the assessed value.

A deduction of JPY12,000,000 from the appraised value of the house is allowed when a new house, with floor space no more than 240 sq. m. and no less than 50 square meters (40 sq. m. for a rented apartment, etc.) is built for residential purposes.

If a residential house that is pursuant to this special deduction is built within three years of or one year before acquisition of the site, the tax levied on the appraised acquisition value of the site is reduced by 3% of JPY1,500,000 or 3% of the value of a site that has twice as much floor space (up to 200 sq. m.), whichever is higher.

*Appraisal Value: A value to calculate the fixed property tax on a property. Usually listed in tax register book. The value is unique and independent from actual costs to build or purchase the land. For cases of newly building, improving or making an enlargement to a property, a new value will be sought by referring to other existing values in vicinity and approved by a register of the authority. Generally, appraised value is 50-70% of construction cost for building property and around 70% of a purchasing price for the land property. For simplicity, we assume that the appraised value is equal to the purchase price.

Registration and License Tax (National Tax):
Tax for registering the setup of ownership or mortgage on a property. Usually separated in land and building part. The registration tax for transfer of real estate by sale is 2%. The tax rate for registration of land is reduced to 1% as a temporary measure for the period April 1, 2006 to March 31, 2008.

Judicial Scrivener Fees:
Fees to be paid to a judicial scrivener (Shiho Shoshi) for registration formalities. A judicial scrivener is a paralegal who focuses on the corporate set-up part of the Japanese commercial code and so in one respect functions like a lawyer and similar to other countries, legal fees are negotiable.

Stamp Duty:
Tax for deed of contracts concerning transfer of real estate.

Japan - more data and information

• How landlord-friendly is the law in Japan?

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