First, the simple answer is, “Yes, foreigners can purchase a home and/or property in Japan.” There are no legal restrictions on foreign ownership of real estate in Japan.
There are, however, a few caveats. Buying property in Japan often differs from that in other countries, and it can be complex due to language barriers and differences in legal and financial systems.
Let’s do a deep dive to clarify what is and is not possible.
Requirements for Foreigners Purchasing a Home in Japan
To be eligible to purchase a home or property in Japan as a foreigner, besides the funding, there are a few requirements to prepare in advance.
Valid Residence Card or Visa
All foreigners who live in Japan are required to have a valid residence card, which is called zairyu card (在留カード) in Japanese.
Technically, it is possible for a foreigner without a valid residence card to purchase property in Japan. However, it may be more challenging to do so, as the buyer would need to comply with certain legal and financial requirements.
Without a valid residence card, the process of obtaining several of the other requirements listed below is likely to be troublesome.
Furthermore, a foreign buyer without a valid residence card may face additional legal and administrative hurdles, such as obtaining a tax identification number and registering the property with the local government.
First, some Japanese nomenclature; Don’t stress, as it is not as complicated as it may sound.
Foreigners who wish to purchase property in Japan must have a registered seal or jitsuin (実印) in Japanese, which is a personal stamp or hanko (ハンコ) used in place of a signature on important documents in Japan.
A jitsuin is an officially recognized seal that is registered with the municipal office of a city, ward, town or village. Registering a hanko at the municipal office is called inkan toroku (印鑑登録) or registration, and the registered seal is called jitsuin (実印).
When you register your seal, you can obtain a seal registration certificate or inkan shomeisho (印鑑証明書) in Japanese. With this certificate, it is recognized that “the document is indeed stamped by the person himself/herself using his/her own seal.” The equivalent in the West is a notarized signature.
Bank Account in Japan
Opening a bank account in Japan can be somewhat difficult for foreigners due to the language barrier and the country’s strict banking regulations.
However, with the right preparation and documentation, it is possible for foreigners to open a bank account in Japan. One of the primary challenges for foreigners is the language barrier, as many Japanese bank employees do not speak English fluently.
Therefore, it can be helpful to bring a Japanese-speaking friend or interpreter to the bank when opening an account. Some Japanese banks are known to cater to foreigners living in Japan. Some make it possible to conduct almost all business in English and have limited transaction fees.
A few recommendations include the following (listed in alphabetical order): Japan Post Bank, Mitsubishi UFJ Bank, Mitsui Sumitomo Bank, Mizuho Bank, Seven Bank, Shinsei Bank, SMBC Prestia Bank, and Sony Bank.
Another challenge is meeting the strict documentation requirements. To open a bank account in Japan, foreigners typically need to provide a valid passport and a residence card or visa, as well as proof of address, such as a utility bill or rental agreement.
In some cases, banks may also require proof of income or employment, as well as a registered seal or jitsuin (実印) in Japanese (see above).
In addition, some Japanese banks may have specific requirements for opening an account, such as a minimum deposit amount or a certain type of visa.
It is always a good idea to research the specific bank’s requirements in advance and to contact them directly to confirm the necessary documentation and procedures.
Secured Loan from a Japanese Bank
Although not always required (e.g., payment in cash), it is often easier said than done to obtain a bank loan as a foreigner in Japan.
Some Japanese banks may be hesitant to lend to non-Japanese buyers, and the loan application process may be more complicated for foreigners. See the next section for more details.
Guarantee from a Guarantor Company
Guarantor companies, also known as hoshonin (保証人) in Japanese, are third-party organizations that provide a guarantee to the seller or lender that the buyer will fulfill their financial obligations.
In many cases, Japanese banks and real estate companies require a guarantor for non-Japanese buyers because they are not familiar with the buyer’s financial history or creditworthiness.
The guarantor company typically charges a fee for their services, which can range from a few thousand yen to several percent of the purchase price.
Not all prospective buyers may be required to obtain a guarantee from a guarantor company. It can depend on various factors, such as the buyer’s financial situation, the type of property being purchased, and the specific lender or seller involved in the transaction.
Type of Property That Foreigners Cannot Purchase
Under the Foreign Exchange and Foreign Trade Act (FEFTA), foreigners are generally prohibited from purchasing land designated as “forest” or “agricultural” without permission from the Japanese government.
This is to ensure that these lands are used for their intended purposes and to protect the environment.
Foreigners may also face restrictions on purchasing land near military bases or other sensitive areas, as these properties may have national security implications.
Some condominium buildings may have rules that restrict the sale of units to non-Japanese residents.
These rules are known as “gaijin bans” or “foreigner bans,” and while they are becoming less common, they can still be found in some parts of Japan.
Can Foreigners Invest in Properties in Japan?
Foreigners can invest in and purchase property in Japan even if they do not live in the country.
In fact, many foreign investors choose to buy property in Japan as a method for diversifying their real estate portfolio and to take advantage of the country’s stable economy and relatively low property prices.
To purchase property in Japan from outside the country, foreign investors will typically need to work with a local real estate agent or attorney who can help them navigate the legal and financial requirements for the transaction.
This may include obtaining financing from a Japanese bank or working with a guarantor company to secure a loan.
Foreign investors may also need to consider the tax implications of owning property in Japan, as well as any fees or expenses associated with maintaining and managing the property from abroad.
While the saying “cash is king” certainly applies in Japan, sometimes it may be necessary to obtain a mortgage to have enough funds to purchase a particular home or property.
Can Foreigners Get a Loan/Mortgage in Japan?
Securing a home loan or mortgage from a Japanese bank as a foreigner living in Japan can be challenging, as banks have strict requirements and regulations for lending to non-Japanese residents.
However, with the right preparation and documentation, it is possible to obtain financing for a property purchase.
Here are some of the key requirements for securing a home loan or mortgage from a Japanese bank as a foreigner living in Japan:
Valid Residence Status
You must have a valid residence status in Japan, such as a visa or a permanent resident card. Without a valid residence status, it can be not easy to obtain financing.
Good Credit History
Banks will typically require a good credit history, both in Japan and in your home country. This can be demonstrated through a credit report or other documentation.
Establishing a good credit history as a foreigner living in Japan can be challenging, as credit systems and requirements may differ from those in your home country.
The length of time it takes to establish a good credit history in Japan as a foreigner can vary depending on various factors such as your income, type of visa, and the types of credit you use. Generally, it can take at least six months to a year of consistent credit behavior to establish a good credit history in Japan.
This means having at least one credit account open, such as a credit card or a personal loan, and using it responsibly. It’s important to make payments on time, keep credit utilization low, and avoid having too many inquiries or opening too many accounts at once.
Many banks and financial institutions in Japan may require a certain level of Japanese proficiency and proof of stable income or employment to approve credit applications.
This can make it challenging for foreigners who are new to the country or who have limited Japanese language ability.
Banks will want evidence of stable and sufficient income to cover the mortgage payments. Pay stubs, tax returns, or other financial documents can demonstrate this.
Many Japanese banks have age restrictions for mortgage borrowers, and some may not offer mortgages to retirees or those close to retirement age. If you have trouble, consider the following options:
- Choose a Lender that Caters to Foreigners: Some Japanese banks and financial institutions may have more experience working with foreign customers and may be more willing to lend to retirees with permanent residency status.
- Provide Proof of Income and Assets: Retirees with permanent residency status may be required to show proof of stable income or assets, such as pension income, investment income, or savings. Providing detailed financial documentation and a plan for repayment may help to overcome any income or employment restrictions.
- Consider a Guarantor or Co-signer: Retirees with permanent residency status may be able to obtain a mortgage with the help of a guarantor or co-signer, such as a family member or friend who has a stable income or employment.
- Choose a Shorter Mortgage Term: Retirees may want to consider choosing a shorter mortgage term, such as a 10 or 15-year term, which may be more manageable and easier to obtain.
- Explore Government-Backed Programs: The Japanese government offers various programs and subsidies to support home ownership, including special mortgage programs for permanent residents. Retirees with permanent residency status may be eligible for these programs, depending on their age, income, and other factors.
- Adequate Down Payment: You will typically need to provide a down payment of at least 10% ~ 20% of the property value. Foreigners may be required to provide a down payment of 30% or more of the purchase price, depending on the lender and the type of property. This is because foreign borrowers are seen as higher risk by Japanese lenders due to the potential difficulties in assessing their creditworthiness, as well as the possibility that they may leave Japan before the loan is repaid. It may also be necessary to demonstrate adequate funds to pay for other costs such as mortgage registration fees, property taxes, and insurance.
- Guarantor: Some banks may require a guarantor, who is a Japanese citizen or permanent resident who agrees to assume responsibility for the loan if the borrower defaults.
- Japanese Language Ability: Some banks may require that the borrower have sufficient Japanese language ability to understand the terms and conditions of the loan. Do not expect a Japanese bank to be able to provide a term sheet prepared in English.
The prospect of buying a home in Japan as a foreigner is indeed a reality. Although the process might seem complex, it can be navigated successfully with the right knowledge and guidance. The country’s robust real estate market and strong legal protections for property owners make it an attractive destination for foreign buyers.
While there are certain barriers, such as language and cultural differences, or the challenge of securing a loan without permanent residency, none of these are insurmountable. Through careful research, thorough planning, and the assistance of real estate professionals familiar with the needs of foreign buyers, owning a piece of the Land of the Rising Sun is well within reach.
At Tokyo Portfolio, we are dedicated to helping you navigate this process. Our team of experts is experienced in addressing the needs of foreign buyers and can provide the guidance necessary to make your dream of owning a home in Japan a reality.