Japan is open to foreign real estate investors, even overseas ones. It is possible for foreigners to own buildings and land, with no restrictions on ownership. Because of this, it is one of the world’s top destinations for private real estate investors in the know and thousands of investors buy Japanese real estate from overseas each and every year. Let us put this in context by taking a look at the situations in several other countries: New Zealand, Australia, the Philippines, Indonesia, and China.
On October 24, 2017, the Prime Minister of New Zealand announced some shocking news for foreign overseas investors hoping to buy real estate there. From 2018, they would no longer be allowed to buy preexisting buildings in New Zealand. Overseas investors would either have to finance a brand new building, or forego the property market in New Zealand altogether. This would pertain to all nationalities except for Australians, and was done to protect the local housing market from speculators who were driving up prices to the point where they were unaffordable for ordinary New Zealanders.
Why were Australians the only ones exempt? Because Australia also has very strict laws about what foreign overseas investors can and cannot own, and only New Zealanders are exempt. Australia’s regulations are very complicated, but generally, in Australia, it is possible for most foreign overseas investors to buy a new building, but not one that has previously been lived in. They may buy land only as long as they complete the construction of a new building on it within four years. In order even to get the process started, there is an application fee of at least 5,000 Australian dollars with no guarantee of actually being able to purchase any real estate at all. Breaking the law can result in a fine of 135,000 Australian dollars for the investor.
Everyday, one can read news about the rise of China in BBC News or on CNN, which might lead to one becoming interested in buying real estate in China. However, ownership of Chinese land is not possible (it can only be leased for 70 years at a time); only buildings can be owned (even for Chinese citizens!). A foreigner may buy a house if he or she has worked or studied in China for at least one year, but they cannot rent out the property as an investment.
How about Southeast Asia? In the Philippines, land ownership by foreigners is prohibited. In Indonesia, foreigners cannot own land or buildings, only possessing the “Right to Use,” not the “Right to Own,” and the “Right to Use” is strongly tied to his or her status of residence, meaning that investing in Indonesian real estate from overseas would be nearly impossible.
Japan has no such restrictions. You can invest in however many buildings or however much land you can afford, from the iceberg-lined coasts of northern Hokkaidō to the tropical beaches of Chichijima.
How To Buy Japanese Real Estate From Overseas
Remember that investment decisions are about the numbers and not about feelings. 90% of investments are done without visiting the property, and transactions are done at a distance.
- Decide your budget. This can be as small as US$20,000 for a one-room condo, but the sky is the limit for how much property you can buy.
- Assess options with your Japan-based real estate adviser about how to buy Japanese real estate from overseas. He or she is very valuable and can offer you not only the properties listed on popular real estate websites, but some unadvertised gems. Your adviser can then guide you through the process, making what was once complicated quite simple.
- Submit an offer. You should not expect to be able to lowball the seller, but as long as the offer is the advertised price, it will go well. There is a Purchase Application (購入申込書, kōnyū mōshikomisho) that your adviser can help you fill out.
- Pay the deposit/Earnest Money (手付金, tetsukekin), which will hold the property and prevent the current owner from selling it out from under you.
- Decide on the contract date.
- Do the contract process. This can be done via Skype.
- You can elect for your real estate adviser to complete the contract process for you. Most people do. Pay the outstanding balance. A judicial scrivener transfers the title, and the property will officially become yours. Start receiving rent.
Facts About Foreign Investment In Japan
Japan has come a remarkably long way in embracing the outside world since it was visited by Commodore Perry just 155 years ago. Currently, Foreign Direct Investment (FDI) is at 4% of its GDP, but this number is growing. The current administration is trying to make the laws friendlier to FDI. For example, whereas before Japan required a ¥5 million investment and the hiring of two full-time employees for foreigners to start a business, this is now no longer the case, and whereas it used to take five years for a highly-skilled professional to apply for Permanent Residency (永住権, eijūken), it now takes only one year. The corporate tax rate has also been slashed to 29.7%, lower than in France and Germany.
The result is that recently, Vinci Airlines (a French airline company) bought the rights to Kansai International Airport. Hon Hai, a Taiwanese company, bought a controlling stake in Sharp. In 2016, net inflow of FDI hit a new record: ¥3.8 trillion for that year. There is now ¥27.8 trillion invested in the Japanese economy through FDI. From other Asian countries to Europe to North America, numerous investors have seen opportunities left and right to grow their money in various Fourth Industrial Revolution technologies, and now, real estate investors can enjoy a slice of the FDI pie, as well.
Will the Japanese Government Put Restrictions on Foreign Ownership?
In 2017, Prime Minister Shinzō Abe announced his intention to restrict foreigners from buying property in certain areas sensitive to national security. Fortunately, his plans only pertained to approximately 400 remote islands and land near JSDF (Japanese Self-Defense Force) bases, such as on Tsushima (near Korea). He was concerned that foreign fishermen might create bases for illegal fishing on remote islands, especially on the edges of Japan’s EEZ (Economic Exclusive Zone), or conduct espionage of JSDF bases. Since 2017, there has been very little word on this subject; however, given the global tide of added restrictions on real estate acquisition by foreigners and/or non-residents, it is possible that in the future, Japan might make it more difficult for foreign overseas investors to purchase land as easily as they can at the moment.