Room for Negotiation: Navigating Japan’s Residential Property Market
As a foreigner living in Japan, for the entirety of the 7 years I have lived here, I have rented an apartment. In a recent discussion, a friend of mine hit it home to me to just what a waste of money that has been. Over the course of seven years, I will have paid out somewhere in the region of 6.5 million yen.
When you consider that one can buy a decent sized family apartment anywhere outside the big cities in Japan for around 10-15 million yen, you can see how this would be frustrating. Had I “got on the property ladder” from day one, I would now be more than halfway towards owning my own home outright.
Of course it’s not that simple and when I came to Japan initially I was a 22 year old, fresh out of university who had more important things to spend his time and money on, like beer and women!
Now however, as I enter my 30s, a new found sense of perspective has taken over. Perhaps it’s time for me to look at acquiring some property.
Like a number of similar pursuits in Japan, or indeed any foreign country, such pursuits can be bewildering, frustrating and the potential to “get burned” financially is pretty high. However, with a bit of patience, prior research and the right people supporting you, it can be done.
The first question many would ask is, can a foreigner even buy property in Japan. In principle, the answer is a resounding yes!
For all that many commentators like to project an image of the Japanese business world as backward, bureaucratic and lacking in progressiveness and transparency, in the realm of property ownership at least, Japan has some of the most liberal laws on foreign ownership in the world. In the case of almost all nationalities, there are no actual restrictive laws on property ownership for foreigners. You do not even need to hold permanent residency, in fact subject to meeting a few other simple requirements, you don’t even need to be resident in Japan.
The problem lies in financing.
Perhaps understandably so, given the transient nature of many foreigners who come to Japan, banks here are very reluctant to lend large sums of money to non-Japanese. Even something as simple as getting a credit card can be a frustrating and mind-bendingly difficult, drawn out process, with often arbitrary, seemingly needless denials.
So, in short, if you want to buy a property, it’s probably best that you secure the funding yourself.
If you have a Japanese spouse, or if you hold permanent residency, ideally both, then it becomes much easier to get a home loan from the bank. Individual lending policies vary from bank to bank, so it’s probably best to investigate thoroughly before choosing a lender.
With financing taken care of, the next big question is, where should you buy your property?
Again, this very much a matter of individual needs and aspirations. There are a few factors however, which the Japanese seem to regard with a higher degree of importance than perhaps foreigners would. For example, I am no stranger to walking, and back in Scotland the idea of walking 10-15 minutes before taking the bus or train to work seemed perfectly normal to me. However in Japan, especially in the larger cities, a properties proximity to the train station can greatly affect its value. The difference in price between properties located next to the station or those that are 10-15 minutes’ walk from the station can in some cases, be as much as 40%!
City boundaries play a big part too. For example, a number of years ago, I used to live in Urayasu City, in Chiba Prefecture. At that time the property I was renting was 2 minutes away from the station on foot and had a valuation of around 12 million yen. My friend, lived in a near identical property in nearby Kasai, which was just on the Tokyo side of the Tokyo/Chiba border, and a mere 4 minutes closer to central Tokyo than my place, by train. Yet his apartment was valued at 18 million. For the sake of an extra 4 minutes commuting each day, you could save 6 million yen on your purchase! Of course my apartment lacked the prestige of a “Tokyo-To” address, but do such snobby trivialities really matter that much in the grand scheme of things?
Apartment age is another point to consider. Japanese people place a higher value on newer properties, despite the fact that, provided the building work is sound, and the earthquake proofing is adequate, there is little discernable difference between a property that is 5 years old, and one that is 30 years old. Again, the important thing here is to ensure you do your homework in advance. Get the property thoroughly checked out by an independent surveyor to ensure the current owner’s valuation is fair and accurate.
Property prices also fluctuate according to demand and external factors. For example prices in and around Tokyo are expected to spike in the next few years in the run up to the 2020 Tokyo Olympics. If you can afford to buy it now, a small apartment within Tokyo’s 23 districts could yield a tidy profit in a couple of years. Of course timing is everything here, and the old poker adage of “knowing when to hold ’em and when to fold ‘em” is pretty apt in this case. Make sure you offload the property before the Olympics actually begin to maximize your returns.
Property buying can be a tricky business wherever you are. They say that alongside getting married and changing your job, moving house is one of the most stressful things you will ever do. Having moved around a lot, as both a child and an adult I have to say agree with the sentiment. However, that does not deter me from the dream of someday owning my own home, hopefully in Japan. Now, if someone wants to loan me about 10 million yen, we can begin!