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What should you know when buying a house in Japan?

At Japan Properties, we want to ensure that buyers make an informed decision and are aware of potential problems when dealing with real estate in Japan.
We take an extra mile to deliver the accurate information to the customer.

Having these thoughts in mind, we would like to share our knowledge on how to avoid some potential pitfalls when purchasing a property in Japan. 

1. Brief Overview of Real Estate Market

There are some suburban areas which have more supply-demand balance, for example, a bit far locations like Hachioji or Fuchu – westside areas. In those regions, some property developers are struggling to sell a house, and it means that buyers have plenty of time for negotiation.

However, Tokyo has relatively high prices being in high demand in Japan’s real estate market. Nevertheless, good houses are sold fast.

In the last few years, we had many property developers’ attention on the bay area where most of the activities related to Olympics are planned to be.
In addition to this, currently the Haneda airport area is also in particular demand, and a lot of condos are transacted in those areas.

However, no one is sure how the market will change after the Olympics. Some say that there will be a significant drop in the demand. Some overinfluenced prices may be adjusted, yet in our view, Tokyo will remain unchanged being one of the leading centers of Asia because of the constant flow of people from the regions and an increasing number of foreign nationalities.

Summarising all of those mentioned above, we can assume that Tokyo might have a mild adjustment.
Thus, to stay on the bright side, it is necessary to be careful with Real Estate.

2. Types of Properties

When buying a property in Japan, you have three primary options:

1. Condo
2. Detached House
3. Land

Condos and houses have two main types:

a. New
b. Pre-owned

The condo construction projects also vary depending on the target market: family, single or couple. There is plenty information on the web dedicated to this topic, so one can easily access it.

3. Behind the high price

With the new condos, prices include their promo cost for the glossy brochures and for setting up showrooms, etc. For example, a showroom can be located not in the building itself. The company will rent a space making it off-site because the house itself might still be under construction.
It can cost millions of yen to the property developers, so it is better to keep that in mind because it eventually impacts the price.

Another fact about a new condo is that if the mansion has, for example, 50 rooms, owners release them to the market partially, step by step. By doing this, they are trying not to saturate the market and to create a demand.

Due to the high competitiveness of the market, developers try to equip their properties with technical gadgets to make them more appealing. But be careful because each innovation comes with a price tag on it.

It might be a good idea to look at the condos that are few years old. However, there might be not that many of them because when people buy a condo, they, of course, tend to live there at least around 4-5 years.

4. Be Aware of the Pitfalls

Shuzentsumitatekin and Kanrihi – a possible trap for those who are unaware.

1. 修繕積立金 – Shuzentsumitatekin – Reserve Fund
2. 管理費 – Kanrihi fees – Administrative Expenses + Daily Cleaning + Minor Maintenance 

which are set by the property developer.

At the time of the first release, developers tend to set the amount of reserve fund at a low rate. However, after time goes by, this charge might increase due to necessary repair works for the whole building.

Developers set the price at a lower rate to attract buyers, so you must keep in mind that these fees might increase after some time.

Property developers decide the price of the reserve fund by using “修繕計画” (Shuzen Keikaku) – repair plan estimation.
Typically, the estimation of the repair cost is reviewed when the necessity arises.

5. Know Your Neighbourhood – Tips of Real Estate Consultant

We assume that everybody would be concerned about the overall environment of the mansion before relocation.

After you move, there is a possibility that your neighbors will cause you inconvenience and the management company would not correctly supervise the building. And even if you can resolve these issues, it will take time and effort.

There are simple ways of finding out whether the property is worth to move or not and we want to share them with you.

The crucial area to view is a notice board of the mansion. If the last year’s advertisement is still hanging out there, it means that management company does not pay attention to what is happening.

Also, it would be helpful if you keep an eye on the common area, amount of lighting in it. It would be better to check even the rubbish bin because the way people manage their rubbish can tell a lot about them.
Everything must be taken into consideration because it can tell much about residents and management company.

We highly recommend checking the record on the AGM (Annual General Meeting) – what are the discussions, any issues? 

Legally you have a right to ask the agent to provide those records before signing the purchase documents.

Usually, real estate agents do not want to concentrate buyer’s attention on that because they want clients to go straight to the purchase step.
If the client found out the issues afterward, agents will not be responsible for this.

Real estate agents get the copy of AGM, internal rules of tenants, reserve fund information from the seller’s agent. They usually provide the information at the time of the contact not before.

We, on the contrary, are trying to get this essential information before signing the contract so the buyer can examine it thoughtfully without rush.

6. Pre-Owned Houses and Condos

With pre-owned condos and houses, there are two main kinds –

1. The owner is currently living on the premise.

In this case, moving in might be delayed because the owner will be most likely to start searching for a new house for himself after signing the purchase contract.
Also, cleaning and renovation works must be done, which depending on the house means around 2,000,000~3,000,000 JPY of additional expenses.

Thus, there will be extra costs if you buy an occupied unit and you have to wait a couple of months for the previous owner to move.

2. A pre-owned unit sold by real estate company.

If a real estate company buys a unit, it puts effort to make a house as appealing as possible. It includes renovation and cleaning works to make the house look tidy and attractive.

In this case, the real estate company is the vendor who knows the business and will help you to move in. In addition to this, you can get a two-year guarantee from the company on any hidden primary defects – 瑕疵 (Kashi).
This word means “unfound defects.

Word Kashi is used in case if the house condition is different from what owner initially promised. For example, weak roof construction which leads to rain leakage will be considered as a hidden flaw – Kashi.

“2年間を瑕疵担保します” – Ninenkan wo kashi tanpo shimasu.
This phrase means that company will provide a two-year warranty for any unfound defects.

There is a useful FAQ related to Kashi. (only in Japanese)

They were a lot of issues in the past with the Kashi – hidden defects. It is why people concerned to buy pre-owned houses because they were not sure what hidden errors they might be.

It was one of the reasons why pre-owned house market in Japan is not developed.
Another reason is that the government’s policy is encouraging buyers to purchase new houses because it has a significant impact on the national economy – on the GDP.

Recently, however, this was seen as a problem. Because after several years these new houses will become old. Currently, Japan has over 5 million homes available because the secondary house market is not developed. In Japan, it is called “空き家問題” – vacant houses issue.

To encourage people to buy pre-owned houses the government issued an order that any real estate agent must let the potential buyer know that he/she can inspect the home.

An agent is obligated to tell that to the client that they can use the service of an independent inspector. However, some owners refuse to let the inspections check the house and legally they are free to do it.

3. The third option is to buy land and build a new house from a scratch.

With the land option, there might be a problem with borrowing funds from a bank.
Banks usually do not want to lend money to people who are currently renting a place to live. It is because banks assume that this person will not afford to pay the rent and service the loan at the same time.

Summarising all of the mentioned above, it is evident that without specific knowledge you can face some risks and hidden pitfalls when you buy a property. 

However, with the guidance of the team that cares about people, this process can become a pleasant journey.

This is what we do at Japan Properties – delivering accurate information offering high-level customer service.
We hope that this information will be helpful for people who are involved or considering to move to Japan. 

If you need any additional information, please do not hesitate to comment below.