L'il SECRETS to help you with real estate in JAPAN
Real Estate is a big field involving buying, renting, selling and much more, especially in JAPAN. Here are some hints for you when you as you get into this interesting new world.
SCARY things about owing real estate properties in JAPAN
Basically houses in Japan depreciate, and while land may keep its value, the house on it will be worth less and less as time goes on, going to zero or even minus numbers (to account for the costs of demolishing the building) after a number of decades.
2. ACTS OF GOD
Tsunamis, landslides, volcanoes, typhoons and more
Japan has more than its fair share of natural disasters, many of which can affect (or destroy) your property. Insurance may or may not cover you — definitely worth looking very carefully at the fine print.
3. BUILDING new BUILDINGS
You find the place of your dreams, build the perfect house and settle in to enjoy the wonderful view. Then someone buys the land next door and builds a larger house a couple of feet from your bay windows.
There are various laws that pertain when light is restricted etc, but there are also lots of loopholes for big agencies to navigate through.
Termites (shiro ari in Japanese) can be a nightmare for homeowners. Once they move in (burrowing in invisibly from underneath the house) they quickly eat the timber and insulation in your walls and require expensive repairs.
Cockroaches are less serious but potentially more unpleasant. They are everywhere to the point where you can buy roach hotels (Goki buri Hoi Hoi)in your neighborhood convenience store. Japanese people are so used to them that they've nicknames them "Mr. G."
Neighbors and community are a big part of Japanese life. There are many festivals, activities and sporting competitions that you may be asked to take part in. Neighbors very often feel compelled to just walk in your house when ever they want - don't worry they steal anything but lock your door or at least stay dressed.
As the population of Japan is 97.9% Japanese, a lot of Japanese people are still not used to expats living in Japan. This can lead to various behaviors ranging from them awkwardly trying to communicate with you on a daily basis to them yelling at you for putting your garbage out too late, or even worse, too early.
1. CAPITAL GAINS TAX
The capital gains tax is imposed on gains from sales of real estate such as lands and buildings. In the case of an individual, real estate income is calculated apart from other income calculations. If the holding period of a property is five years or less, income tax of 30% and resident tax of 9% are imposed as a capital gains tax on the transfer of real estate. If the holding period of a property is more than five years, income tax of 15% and resident tax of 5% are imposed as a capital gains tax on the transfer of real estate. In the case of a corporation, the gain is included in taxable revenue to calculate the total amount of taxable income to determine the amount of corporate tax, for which an effective corporate tax rate of approximately 30% is applied.
2. PROPERTY & CITY PLANNING TAX
Property tax and city planning tax, imposed on owners of fixed assets such as land and buildings on January 1 of each year, are paid to the local municipalities where the assets are located. Amounts are calculated based on the value of the assets. The standard rate of property tax is 1.4% and the rate of city planning tax is 0.3%.
3. REAL ESTATE ACQUISITION TAX
A real estate acquisition tax is imposed only once when real estate such as land and buildings is acquired. Acquisition of real estate is defined as acquisition of ownership of real estate through transactions such as buying and selling, donations, exchanges, and construction (for new buildings, extensions, or alterations). If real estate is acquired by inheritance, this tax need not be paid. A standard rate of 4% (although special provisions present 3% for land and housing [up to March 31, 2018] and 4% for buildings other than housing) is applied against the real estate value.
Renting a house or apartment
With an increase in the number of foreign workers in Japan, the housing needs of foreigners in Tokyo and regional cities is increasing. When foreigners rent apartments or houses in Japan, they may come across some difficult situations due to the language barrier, Japanese business customs, or due to the need to use a guarantor. If you are a foreigner in Japan, we recommend that you understand the following unique business practices of renting a house in before you start your house hunting.
1. The difference between house hunting in large cities and regional cities
Even in large cities such as Kyoto, Tokyo, Kobe, and Osaka, many real estate agents don't offer their services in English and other foreign languages. In regional cities, it is even more difficult to find such real estate agents. When no information can be found after searching the internet using keywords such as “apartment rental + __ city”, it is a good idea to ask a colleague, friend, or company for help. That company could be us. Mate could provide you with all of your future real estate needs.
2. Tenant background checks when renting an apartment or house
In order to apply for rental housing, you will have to pass a background check. This background check is required regardless of whether or not you are a foreigner, Japanese, making an individual contract, or making a company contract. Whether you can pay rent, are a person with good references, your employment situation, and so on may affect the results of your background check.
In addition, to avoid possible communication problems with owners and management companies, some housing property owners have chosen not to accept foreign tenants. When looking for a house, it is best to check whether or not the property owner rents to foreigners.
Housing properties which advertise to tenants in English or languages other than Japanese, or those which can be found by using search keywords such as Rental apartments in Kyoto on a Japanese real estate portal site, are usually available for foreigners. Even when the properties are not advertised as being available to foreign tenants, you may often be able to negotiate if you can speak or are studying Japanese, or if you can designate a Japanese person to be contacted on your behalf.
3. Key money, renewal fee, brokerage fee, guarantee fee
As is common in all countries, in addition to the monthly rent, a security deposit is paid when renting a property. In Japan however, there are other unique charges that may not make sense to some foreigners.
Key money: a non-refundable expense paid to the lessor at the time of a lease contract. It is usually the amount equivalent to 1-2 months’ rent.
Renewal fee: a non-refundable expense paid to the lessor at the time of contract renewal in the second year from the start of the contract.
Brokerage fee: a fee paid to a real estate company. The amount equivalent to 1 month of the rent + 10% consumption tax. It is common in Japan that a lessee pays this fee to a real estate agent.
Guarantee fee: When the guarantor is a guarantee company, this expense is paid by the lessee to the guarantee company. The amount is equivalent to 50-100% of a monthly rent.
Security deposit: The majority of the security deposit will be returned to a lessee if there is no damage due to intention or negligence upon vacating the property. However, a cleaning expense will usually be deducted from the deposit in.
The expenses and fees as stated above will be charged when renting a housing property under a long-term lease contract.
When you rent a housing property in Japan, you will be required to have a guarantor’s signature or seal on a lease contract or to have a contract with a guarantee company.
To be a guarantor, usually you will have to be Japanese person living in Japan with good credit. It may not be easy for a foreigner who has just arrived in Japan to find such a person. If you do not have a supervisor from your company or a close acquaintance who you can ask, you may have to pay a guarantee fee and make a contract with a guarantee company. There are a several guarantee companies which provide their services to foreign clientele.
5. Furniture, appliances, and utility costs
Rental properties with long-term contracts in Japan do not generally come with furniture, home appliances, lighting fixtures, or curtains. Utility costs are also not included in the monthly rent. In addition to the rent, it is better to assume that the purchase cost of furniture and home appliances (or lease fee for furniture and appliances), utility costs, and an internet connection fee will be charged separately.
For short-term contracts such as monthly apartments and shared houses, furniture, appliances, fixtures and utilities are usually included in the rent.
Selling your real estate
1. Real Estate Agent
The first step in selling a property is to find a trustworthy and honest real estate to assess its value. Once the selling price is set, it is necessary to put the property on sale and to bind a mediation agreement with an agent who intermediates to sell the property.
2. Real Estate Sales Contract
When a buyer is found, the seller receives an offer to purchase or application form from the real estate agent. This form states the buyer’s desired price, schedule for signing the contract, payment method, desired hand-over schedule, and other conditions.
Once the seller and the buyer come to an agreement, a sales contract is drafted stating the agreed selling price, payment method and other agreements.
The seller needs to notify the condition of the property when preparing the Real Estate Sales Contract. It is essential to report the present condition clearly and properly and have the buyer understand it fully in order to avoid any troubles throughout the transaction. It is required to hand-over the property in the condition that is reported to the buyer in the contract.
Any leakage or damage caused by termites or the surrounding environment will be reported in the Confirmation Note of Inspection of the Premise.
When both the seller and the buyer sign and seal the contract and the buyer remits the down payment to the seller, the contract is binding.
Penalties may occur if any of the conditions of the contract are violated.
The following are required in order to sign the sales contract:
Jitsuin: officially registered seal (If a foreigner doesn't have one, it can be substituted with a registered signature)
Original copy of seal registration certificate (issued within three months)
Photocopy of ID such as a passport and driving licence
List of facilities: Any defects or malfunctions of the equipment included in the property such as the kitchen, bathroom, air conditioning, water heaters are reported in this list
Confirmation Note of Inspection of the Premise: Any leakage or damage caused by termites or the surrounding environment is reported in this note
3. Costs and Taxes
In addition to the moving costs there are a number of costs and taxes involved when selling a property, which may include the following:
Stamp duty: documentary stamp tax required for the contract
Income tax: residential tax arising from the profit of the sale
Agent commission: 3% of the sales price + 60,000 yen + consumption tax in accordance with property transaction regulations
Disposition of mortgage fee: required if the mortgage has not been paid off. This is approximately 15,000 yen per mortgage
Commission for the legal scrivener
Surveyor's commission: the fee for land surveying to determine the boundary points
4. Delivery of the Property
The property, along with all keys, is delivered once the remaining balance is settled. If there is an existing mortgage such as a housing loan, it is necessary to arrange to pay off the mortgage in a lump sum prior to the balance settlement day.
A legal scrivener checks all the necessary documents to apply for the registration of ownership transfer. Once the payment is complete, applications for ownership transfer and disposition of the mortgage are conducted, generally by the legal scrivener.
The seller is responsible for the payment of fixed asset taxes and any property management fees (if the property is an apartment) up to the delivery day.
Once the keys have been handed over, both parties are requested to sign the delivery confirmation note and exchange a copy, which confirms that the process of closing the sales contract is complete.
The seller pays the commission fee to the real estate agent and legal scrivener, and the sale of the property is completed.
Finally, the scrivener will go to the Central Japan Real Estate Registration Association to re-register the property in your name. This process must be don on the same day to insure that no foul play occurs. For this reason, real estate contract meetings are usually done in the morning or early afternoon.