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Buying in Japan

Japan allows foreign individuals and corporations to purchase freehold properties and has strict buyer protection laws.

Here at Heritage Homes Japan, we are delighted to assist you in navigating the process of purchasing freehold properties in Kyoto. We offer a unique opportunity to invest in Kyo-Machiya shophouses and farmhouses.

Purchasing Without Visiting Japan

Heritage Homes Japan offers innovative solutions for customers seeking to purchase properties without physically visiting them.

Virtual tours: Embracing the power of technology, we now offer virtual property tours through video calls on platforms such as Zoom, WhatsApp, or Skype. Explore the properties from the comfort of your home and gain real-time insights into their condition.

Physical tours: If you have acquaintances or representatives in Japan, they can conduct on-site viewings on your behalf.

At Heritage Homes Japan (HHJ), we offer two convenient options for receiving funds during your property purchase. As licensed Real Estate Agents, we can securely receive funds into our client account on your behalf. Alternatively, we can assist you in appointing a trusted attorney to handle the fund transfer process.

You can appoint an escrow agent for added security during the purchase process, and we are pleased to offer recommendations for reputable agents. We will provide timely and comprehensive information regarding all necessary documents well in advance in both English and Japanese.

Download our comprehensive PDF guide that covers everything you need to know about the costs and taxes associated with your purchase.

Purchase Process

From inquiry to home insurance coverage, let us guide you through your property acquisition journey.

Begin your property search in Kyoto, Japan, by submitting an inquiry via our contact form. After initial discussions, we will send you a shortlist for your consideration with general facts about the properties, price and estimated renovation costs.

Please be aware that, during the buying process, including property viewing trips, we do not offer compensation for any costs, such as airfare. This policy remains in effect, even if an offer is made on the property you are interested in while en route to Kyoto for the viewing.

We aim to provide you with all pertinent information and initiate the initial discussions concerning the necessary renovations for the properties in question. It is crucial to understand that Kyo-machiya townhouses exhibit varying conditions and situations, with some being antique houses over 80 years old. As such, buyers are requested to accept the properties in their current conditions without any alterations.
  • Preliminary Agreement: This document serves as a non-binding Letter of Intent, laying the groundwork for the subsequent contract.
  • Letter of Intent (LOI): This non-binding letter expresses your intention to purchase the property and outlines the proposed terms and conditions, including the anticipated price and payment procedure. You may submit the LOI to us via hand delivery, airmail, E-mail, or FAX.

It is essential to be mindful that the seller reserves the right to decline the LOI or discontinue negotiations if mutually acceptable terms cannot be reached. However, in the event that both parties reach an agreement, preparations for the formal contract will promptly commence.

To complete the contract signing, we kindly request your presence at our office in Kyoto. Before signing, we will explain all the terms and conditions in Japanese, adhering to the requirements of the Building Lots and Buildings Transaction Business Act. Please ensure you have the earnest money ready, as during the meeting, we will also collect payment for stamp duty and the first half of the agent commission. It is important to familiarise yourself with all associated costs and taxes in advance.

Necessary Items: Passport (for identification purposes).

  • Governing Language:
    Please be informed that all contract-related documents will be presented in Japanese. However, our English-speaking staff will be available to offer verbal translations if required. If you prefer explanations in your native language, we strongly advise you to hire a translator proficient in real estate transaction laws, such as a solicitor or attorney, to ensure a comprehensive understanding of the contractual terms and obligations.
  • Earnest Money Deposit:
    To proceed with the sale and purchase contract, we kindly request all clients to provide an earnest money deposit equivalent to 10% of the purchase price. This deposit serves as a guaranteed commitment towards the property acquisition and acts as security against any potential penalties.

For your convenience, you can make the payment in Japanese YEN either in cash at the time of contract signing or through a bank transfer. If opting for a bank transfer, please ensure the payment is completed by the morning of the contract-signing date.
Considering the potential processing time for overseas transactions, we advise making the payment well in advance to avoid any last-minute complications. It is important to note that any applicable bank transfer fees will be the sole responsibility of the buyer.

During the closing process, the remaining purchase balance, state taxes, and stamp duty must be paid. To facilitate a smooth transaction, your real estate attorney should be present at the closing meeting and promptly register the title transfer at the Legal Affairs Bureau afterwards. We collaborate with two proficient English-speaking property attorneys to handle our client’s acquisitions, but you may also opt for your preferred attorney.

Necessary Items: Passport, Affidavit for Proof of Residence (or equivalent certificate), Certified copy of corporate registration (or equivalent certificate).

For the closing payment, you can settle the remaining balance in Japanese YEN either in cash at our office or through a bank transfer, ensuring it is completed by the morning of the closing date. Additionally, we kindly request payment for the second half of the agent commission and the settlement amount for Fixed Asset Tax at this time. It is crucial to be well-informed about all applicable costs and taxes.

In Japan, solicitors/attorneys play a crucial role in real estate transactions, handling tasks such as certificate preparation and title transfer. We can introduce solicitors/attorneys proficient in English. However, if you prefer other solicitors or attorneys, please note that they must be native Japanese speakers and possess the necessary expertise in real estate transactions involving foreign clients.

These experts provide support for three essential procedures and two additional options:

  • Aiding in the preparation of certificates.

  • Witnessing the closing meeting (not mandatory for the contract meeting).

  • Registering the title transfer at the Legal Affairs Bureau.

Optional:

  • Offering translation and/or reviewing of contract documents.

  • Assisting with tax administration.

In Kyoto, all utility bills can be conveniently paid via credit card (VISA, Master, JCB, or Diners Club). Alternatively, if you possess a Japanese bank account, electronic withdrawal is also available. To ensure a seamless transition into your new home, we recommend familiarising yourself with the local customs and practices of living in Kyoto. Additionally, we strongly advise considering the purchase of Home Insurance promptly to secure your investment.

Home Insurance:

This insurance coverage will safeguard you against potential losses or damages, including fire and earthquake incidents. Should you desire a preliminary quote, we will address your inquiries and provide further details.

Aquisition

When buying property in Japan, it’s important to be aware of the various property-related taxes. Here’s an overview, but please note that taxes are calculated on the local council’s ASSESSED value of the property, not the sales price. This is typically significantly lower than the sales price, especially in resort areas, about 1% of the sales price is a good guide.

  • Property Acquisition Tax: This one-time tax is levied when you acquire property. The tax rate varies depending on the type and value of the property. For residential land and buildings, the rate is currently 3% of the assessed value. However, there are reductions available for newly built houses or for land purchased for residential use. Note that tax on land is due to increase to 4% from April 2024.
  • Fixed Asset Tax: This is an annual tax, levied on the owner of the property as of January 1st each year. The rate is 1.4% of the assessed value of the property. The value is reassessed every three years, which can lead to changes in the tax amount. If you purchase a property midway through the year you will pay the tax pro-rata.
  • Title Registration Stamp Duty: When you register a property or change the registered information (like ownership), this tax is applicable. The rate for acquiring real estate is 2% of the assessed value for land and 2% for buildings.
  • Japanese Consumption Tax: Applicable only to property purchases (not land), this is 10% of the SALES price, not assessed value. Buyers can reclaim this amount if the property is rented out in the subsequent year after purchase to short-term holiday rentals.
  • Contract Stamp Duty : When you execute a contract within Japan for a property transaction, a stamp duty is payable. The amount depends on the value of the property or the amount stated in the contract and is payable by both the buyer and the seller
    • 10,000 JPY for transactions at 10m-50m JPY
    • 30,000 JPY for transactions at 50m-100m JPY
    • 60,000 JPY for transactions at 100m-500m JPY
  • Withholding Tax: If the seller lives overseas, the buyer pays withholding tax (10.21%) to the Japanese tax office and the remaining 89.71% of the purchase price to the seller. This is usually done by the real estate agent on the buyer’s behalf, but it must be done by the 10th day of the following month after the sales transaction completes.

Remember, the assessed value used for tax calculation differs massively from the market value. It’s also important to check for any local variations or additional taxes specific to the area where the property is located. This overview provides a general guide, but it’s advisable to consult with a local tax professional for precise calculations and up-to-date information.

The rebuildable vs nonrebuildable issue

As you know, a huge percentage, probably 75-80%, of Machiyas in Kyoto are located in alleyways. Many of these are classified as ‘nonrebuildable’ which means that, in case of ‘total destruction’, they cannot be rebuilt. Her is a brief summary of the regulations and how they may be interpreted. Please note that this is not  legal advise, and that Heritage Homes Japan are not legal experts, We advise all clients to seek independent legal advise prior to purchase!

What is a Non-Rebuildable Property?

Non-rebuildable land refers to plots where constructing new buildings is prohibited after complete destruction.

In Kyoto, such restrictions often stem from inadequate road access, like widths less than 2 meters, or adjacency to alleyways not legally recognized as roads. It may also be to prevent property owners to demolish traditional Machiyas and build modern houses

Why Are Certain Lands ‘Non-Rebuildable’?

Historical properties pre-dating relevant laws often lack required road access, rendering them technically speaking non-rebuildable in case of complete destruction. 

Perceptions and Considerations

Despite limitations, non-rebuildable properties offer affordability, potential tax benefits, and retain traditional charm. However, they may face challenges like lower collateral value and reconstruction hurdles post-disaster.

Re-building a house in alleyways

Some non-rebuildable properties may obtain permits under certain conditions, such as acquiring adjacent land for proper access. Thus, non-rebuildable doesn’t necessarily mean unsellable or devoid of value. Indeed, houses built on such lands are fully insurable to their total value, and there is therefore in our opinion no financial downside to purchasing such a property. 

IN SHORT: The operative words in this regulation is, in our opinion ‘total destruction’ of a property. Thus, it does not apply if the property has fire damage, flood damage or indeed in any way is not regarded as totally destroyed. It is then a renovation, not a rebuild.

Talk to us!​

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