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How to Buy a Real Estate in Japan
In Japan, 120 million people are living in the country which is only one twenty-fifth as large as the United States in size. What is worse, the country is mountainous, which means that there is not so much land for the human residence or utilization. For this reason, a real estate in Japan is a precious, valuable asset however small it may be. A real estate, especially if it is located in the urban area, is considered good enough to make the owner “wealthy” even if it costs him/her a lot.
It is said that the land does not depreciate. The land is the most important collateral when the financial institutions such as banks are loaning. As the Japanese small businesses have very few opportunities for equity finance, if any, many of them provide the land for collateral when they obtain loans from the bank. In this way, the land is the very basis of the financial activities in Japan. People said the Japanese economy was based on “the land standard system”, and this is still substantially true. Though the monetary value of the whole Japanese land was said to be higher than that of the United States, yet everyone believed the price of the land in Japan would never be go down. Actually, the present decline of the Japanese economy began when people found it was only a myth.
In Japan the price of the land and other real estates went down remarkably in comparison with the extraordinary high around 1990, but the real estate is still considered a good investment. Before 1990, people sought for profits from transferring the real estates in a higher price. Today, people are trying to profit from the rent. Like in the United States, recently the system of the real estate investment trust has been established in Japan. The real estate investment trust (REIT, or in Japan some people call “J-REIT”) is attracting some of the Japanese investors who are getting tired of investing in the floundering Japanese stocks. It is a new trend in Japan to purchase apartments for investing.
Generally speaking, in Japan the valuable properties are located in the urban area such as Tokyo. The property is more valuable if it is closer to the railroad or subway station, hopefully within the walking distance. Though Japan is considerably motorized, most of the people in the urban area take a train and/or a bus, because of the heavy traffic and the expensive parking. For this reason, there is always a high demand for the properties located in the convenient areas close to the station. The wealthy do not seem to escape from the city in the near future, in spite of the increasing number of the urban crimes. On the contrary, many people still choose to pay extremely high rents for the small apartment in the urban area for the convenience. In Japan, almost all the economic or cultural facilities are concentrated in the urban areas.
There are no legal restrictions for foreigners or foreign companies to buy or own the real estate in Japan. However, when you are to purchase the land, it is advisable to research the legal matters related the land you are going to purchase, as building or construction on the land is restricted by law. For example, no permanent building or construction is allowed on the “urbanization control area” provided for in Urbanization Planning Act. In Japan each of the lands has its own legal restrictions. Apart from that, most of the lands are provided as a collateral for the loan as you can understand the Japanese business custom mentioned above. It is therefore strongly recommended that, prior to purchase, you should research in the registry to check if any other person’s right, such as mortgage or lien, is attached to the land.
In Japan, in most of the cases, you must buy the real estate through the broker, dealer or developer. You cannot expect any chance to buy directly from the owner through the classified ads or something like that. In many cases, you must ask the financial institutions for loans (in such case you must provide the property to be purchased as a collateral). As there is no escrow system in Japan, it seems a considerable number of troubles happen between the seller and the purchaser. Japanese Civil Code provides for resolution of such disputes over the ownership of the property.
In general, the real estates are very expensive in Japan. Only a small house or apartment costs tens of millions JPY (100 JPY is about 1 USD, as of the early March 2004) if it is located near Tokyo. Most of the Japanese have only one chance in life, if any, to buy such an expensive thing as a real estate. The owner of the real estate, even if considered to be wealthy, must continue to pay for the loan for life. The loan may be quite heavy especially if you buy the property for your residence, not for investment.
However, there is a way to get a real estate in lower costs. You can buy real estates through the court auctions. In this case, however, more careful and scrupulous research is needed in the court, registry and at the site, as it is very possible that somebody occupies the property. Such occupants can be excluded by the court order, but it is not easy if the occupant has registered his/her right to lease. In such cases, you must take a legal action for excluding the occupant.
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