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The Real Costs of Buying and Selling a Home in Japan

Considering real estate in Japan? Here are the pros and cons of buying and renting a property from someone who’s done it.

By 5 min read 2

Homes in Japan are some of the cheapest in the world according to the Organisation for Economic Co-operation and Development (OECD). However, residents still spend, on average, 22% of their total income on housing.

Buying a home instead of renting might improve your lifestyle, but in my experience, it is hard to make a profit. Let’s talk about why you need to be extra careful when deciding on one of the biggest and most important financial decisions of your life in Japan.

Making the decision

There’s a lot of homes ready to be bought up. But is it worth it?


My wife and I were both sick of our crumbling, semi-detached, two-story rental house near the train tracks and some noisy neighbors. We planned to stay in our full-time teaching jobs for at least 10 more years.

That made the expenses of moving, buying a house and even selling it more worthwhile. Neither of us was a permanent resident. Today’s rates are even lower, but in 2004, I got a 2.4% ten-year renewable mortgage loan from MUFJ.

Plaza Homes list banks and their current lending requirements. For foreigners, these vary from a minimum of ¥4,000,000 income over the previous year, a 10% down payment and mortgage insurance.

Requirements are lower for Japanese nationals, but there are exceptions and lower rate longer-term loans. We borrowed the entire amount, including the insurance and downpayment.

In Japan, the buyer’s realtor and the seller’s realtor charge a 3% commission on the house’s selling price and often an extra ¥60,000 for English services. Real Estate Japan offers free webinars and showcases properties all over Japan. Suumo, a major company, lists realtors specializing in foreigners. Rakuten Real Estate and Yahoo! Real Estate also provide property listings. Major price factors include the building’s location, age and distance from a train station or bus stop.

New vs. used

Our own piece of Japan.

Like driving a new car off the lot, a new house depreciates as soon as you purchase it. So just as you might consider buying a secondhand vehicle that is several years old and has low mileage—an older home will be heavily discounted. However, a newer home won’t require expensive renovations.

We bought a lovely three-story house in a nice Kawasaki suburb, 93 square meters and only nine years old.

The sellers had initially paid ¥40,000,000 but listed at ¥29,900,000. We successfully counter-offered ¥26,500,000. Our mortgage insurance (¥1,000,000), realtor fees and taxes were another ¥1,925,350. We had the flooring replaced, the kitchen upgraded and we repainted the house for ¥340,000, altogether costing ¥28,765,000.

A mortgage might not be an investment

The argument goes that paying off your home mortgage is better than paying rent because you eventually own your home. But everything depends on your expenses. For example, our monthly mortgage payments were ¥105,000 compared to ¥114,000 rent for our ancient 60 square-meter rental house.

We now had a wonderful home, better monthly cash flow and avoided the koushin ryou, the biannual rental renewal fee (¥114,000). However, over the 15 years we owned the house, we paid property taxes, repairs and maintenance, totaling ¥2,424,000. Living in that house gave us a great deal of pleasure, yet it wasn’t an investment. Its total cost was ¥31,415,394.

Potential benefits

A quick peek inside.

The financial picture is not as bad as it might look. These days there are some new tax advantages for buyers. For example, homebuyers may be eligible for a home mortgage deduction from their income tax which is 1% of their year-end mortgage balance. In addition, if the buyer earns less than ¥7,800,000 income, they also will be eligible for as much as ¥500,000 in a cashback housing benefit.

Entrepreneurial types can further improve their financial situation by using their homes for a business. For example, they might use a room for a language school. Others might put in a suite and rent to students. One day, they might even rent out their whole house.

A final long-term benefit to owning a home is security for when you retire. Unfortunately, once retired or on a fixed income, finding a rental property isn’t easy. But, because you own your home, you’ll never face this challenge.

Later in life, the opportunity to buy a house is limited because you need employment income to qualify for a mortgage. Some of my retired friends have been shocked. No matter how big their bank accounts or stock portfolios are, they can’t get bank mortgages. Instead, they have to buy with cash.

Selling and cashing out

The most expensive part of buying/selling a home in Japan is the land.

In real estate, only the land (or a fraction of that land for a condo) increases in value. From Hong Kong to Singapore, rising land prices have led to substantial real estate gains.

In contrast, Japan has a falling population, little immigration and more buildings pop up every year. Thus, more vacant properties. Moreover, Tokyo prices have increased very little because of low-interest rates, while other big cities have remained stable. But property values are dropping in small towns and rural areas.

Before the pandemic, my wife and I sold our house—timing the sale between November and April. Homes are usually sold to families with children, and these sales occur before the start of the new school term.

Our agency posted it for ¥23,947,318 because the building had now depreciated over 25 years. The value of our real estate was now close to its land value (roughly ¥20 million). Only three groups came over two months, and one offered the listing price. Our realtor’s fees and taxes were ¥839,160.

Total losses

It’s a big decision, so think it over.

Between our purchase price, a second-hand house and every expense (¥32,254,554), we lost ¥8,307,236. If we had never moved and kept renting our old place for 15 years (with no rent increases), our total housing cost would have been only ¥21,375,000.

Our lifestyle had improved in our new house. But we could have paid twice as much rent and still been farther ahead. We also might have doubled the money we saved by investing it over that same period.

Buying a house in Japan can have excellent personal benefits but usually few financial ones, especially short-term. So take care with what you buy and hang on to the property.

The longer you hold it, the better the numbers. Then, of course, the value of your home depreciates, but eventually, and with some renovations, you might live there comfortably, even profitably.

Have you bought a home in Japan? What challenges did you face? Was your experience like the author’s above? Let us know in the comments!

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  • Manu says:

    Are you sure about your maths? You has loss of 8 million Yen on house but renting would have cost you 21 million then how come you argue that you could have paid twice on renting and still saved ! You actually would have paid three times if you were renting the bad old house so buying house was a good decision for you.

  • Marc says:

    Thank you for the very detailed and numbered article.



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