Several costs to buy a real estate in Japan
When you live in Japan, you’ll think which is better to buy or rent an apartment in Japan.
Then, in order to deliberate it, you will find out several costs relating to buying and renting a real estate.
So, in this page I will compare these situations.
I use this property. (Hereinafter called “room 101”)
(In this page, USD 1 = 100 JPY)
Price : USD 338,000
Room area : 70.2 square meters
In Japan, this room area is enough to live for 4 persons.
Built year : 1996
Now, I will explain the cost of purchasing this apartment room 101.
You have to pay USD338,000.—————————①
You will hire a realtor to purchase this apartment.
Then you have to pay the realtor’s fee.
Maximum rate of their fee is stipulated in law.
Most of the realtors demand this maximum rate.
So, in this apartment, their fee would be like this.
｛ (USD338,000 × 3%)+ USD600 ｝× 1.08(consumption tax) = USD 11,599 —————————②
When you purchase a real estate in Japan, you have to pay a “purchase tax = acquisition tax = shutoku zei= 不動産取得税”.
In order to calculate this tax, I have to get “certificate of valuation of fixed asset = Hyoka-shomei” issued from Japanese government.
In the case of property within 23 wards in Tokyo, this certificate is issued from Metropolitan tax office ( Tozei jimusho = 都税事務所.)
Only owner of property or an agent who has a letter of attorney can get this certificate.
Because, if someone gets this certificate, he can prospect other person’s tax amount.
Fortunately, I have this certificate in the same building.
This certificate is not for room 101. But, this is for same building. So, I can prospect assessed value of room 101.
According to my documents, assessed value (Hyoka gaku) of this room is USD 53,329.
This assessed value differs depending on rooms.
Especially when room area becomes wider, the assessed value will be higher.
And when the room is older, the assessed value( = tax value ) is cheaper.
After completion of building, the tax value decrease gradually.
But, the room area of this certificate and room area of room 101 does not have a big difference.
Therefore, I use this assessed value for room 101.
Furthermore, I have certificate of assessed value of the lot.
According to this certificate, assessed value of lot will be around 219,330,140 JPY ≒ 2,193,301 USD.
This lot is owned by all owners of this building.
So, when I calculate the tax amount for one owner, calculation formula is as below.
2,193,301 USD × percentage of seller’s ownership on a lot.
According to my documents, assessed value of this owner will be 138,500 USD.
Tax rate of purchase tax is 3% in the case of residential property.
If the building is a commercial property, tax rate is 4%.
Tax reduction measures for purchase tax
And there is a Tax reduction measures (Genzei sochi = 減税措置)
As for the land, half of assessed value is taxable value.
The calculation formula for purchase tax is as below.
House : 53,329 USD × 3% = 1599.87 USD
Lot : 138,500 USD × 0.5 × 3% = 2077.5 USD
Thus, 1599.87 USD + 2077.5 USD = 3677.37 USD ————————— ③
As for purchase tax, there is another Tax reduction measures.
First as for the house.
Amount of purchase tax = (assessed value – deductible amount ) × 3%
Deductible amount differs depending on the date of completion or built.
This is in the case of Tokyo prefecture.
Deductible amount differs on prefecture.
|Date of built||Deductible amount|
|after April 1st, 1997||USD 120,000|
|April 1st, 1989~March 31th,1997||USD 100,000|
|July 1st, 1985~March 31th,1989||USD 45,000|
|January 1st,1982 ~ June 30th,1985||USD 42,000|
This deduction is applicable for buyer’s residence.
So, when the apartment is an office, warehouse, this deduction is not applicable.
When someone buys the house to rent out, this deduction is not applicable.
The room area written on the certificate of assessed value should be within 50 ~ 240 square meters .
In the case of apartment made of concrete, it should be built within 25 years.
In the case of house made of wood, it should be built within 20 years.
So, in the case of room 101, this deduction is applicable.
(53,329 USD – 120,000 USD ) × 3% is below zero
The buyer does not need to pay purchase tax as for the house.
Next, I will explain about the purchase tax on a Lot.
When you buy this apartment, you can obtain property right (Shoyu-ken = 所有権) on the lot.
Buyer can obtain share (mochibun = 持分) of property right on a lot.
Amount of purchase tax on lot = (assessed value × 0.5 × 3%) – deductible amount (whichever is higher in あ and い))
あ = 450 USD
い = ( assessed value per 1 ㎡ × 0.5 ) × (room area written on certificate of assessed value ( maximum figure is 200 ㎡) × 2 ) ×3%
So, in the case of this property,
USD2,193,301 ( Assessed value ) / 1003.72 ㎡ ) × 0.5 × ( 70.2 square meters × 2 ) × 3%
= USD 4,601
So, い is higher and 4,601 USD is applicable.
2077.5 USD – 4,601 USD is below zero
So, buyer does not need to pay purchase tax as for a lot, neither.
Registration Tax (Torokumenkyozei) in Japan
Next, I will explain about registration tax ( Toroku menkyo zei = 登録免許税 ).
Buyer has to pay registration tax.
In the case of this apartment, calculation formula will be as below.
House : 53,329 USD × 2 % = 1066.58 USD
Lot : 138,500 USD × 1.5% = 2077.5 USD
So, registration tax will be 3144.08 USD ————————— ④
If you buy this apartment for your residence, and acquire necessary certificate called Jutaku-yo Kaoku shomei sho (住宅用家屋証明書) issued from city hall, you can use tax reduction measures.
House : 53,329 USD × 0.3 % = 159.987 USD
Lot : 138,500 USD × 1.5% = 2077.5 USD
So, registration tax will be 2237.487 USD
Fee of Shihoshoshi in Japan
And as for registration process, you will hire a judicial scrivener (Shiho-shoshi lawyer = 司法書士. This is my profession).
Their fee differs depends on the judicial scrivener.
Their fee will be within 1,000 ~ 2,000 USD.
Generally, when the office is larger, their fee will be higher.
Here, I assume their fee is USD 2,000. ————————— ⑤
Next, I will explain about Property tax ( Kotei shisan zei = 固定資産税).
When you own a real estate in Japan as of January 1st, you have to pay a property tax (固定資産税＝こていしさんぜい) to Japanese government.
When you buy a real estate at August 15th, 2014, you are not the owner as of January 1st 2014.
So, you do not receive a bill from Japanese government until 2015.
Japanese government sends bill after they confirm the owner as of January 1st.
When Japanese government knows that you are the new owner as of January 1st 2015, they will send bill to you around April 2015.
Even if you do not have Japanese nationality and/or address in Japan, you still have to pay property tax.
Some of you would say that you have real estate in Japan, but you have not paid property tax in Japan.
However, it is because you do not know about the tax law in Japan.
Japanese government knows that you have a real estate.
And if you do not pay property tax, they can seize your real estate without your permit.
Tax rate of property tax is 1.4% of valuation of fixed asset.
City planning tax (Toshi keikaku zei)
And if you have a real estate in an area designated for urbanization (Shigaika Kuiki = ), you also have to pay city planning tax (Toshi keikaku zei = 都市計画税).
Room 101 is located in an area designated for urbanization.
So, if you buy this room 101, you have to pay the city planning tax.
Tax rate of city planning tax is 0.3% of valuation of fixed asset.
Property tax + city planning tax =
(1.4% + 0.3%) × (53,329 USD + 138,500 USD ) = 3,261 USD
So, in the case of “room 101”, owner has to pay 3,261 USD once a year.—————————⑥
Stamp duty ( Inshi zei = 印紙税)
When you purchase real estate in Japan through Real Estate Company , they will make real estate sales contract sheet.
They will make 2 sheets of contract. The buyer and the seller will sign their address, name and if they have an affix seal.
On this contract, buyer and seller attach and paste revenue stamp(収入印紙= Shu nyu Inshi).
Buyer and seller or realtor goes to post office to buy a revenue stamp and they paste the stamp on the contract and affix the stamp on the revenue stamp.
The amount of stamp duty is different from sales price.
(There is tax reduction until 2018.These figure reflects this tax reduction.)
|Described sales amount||Tax amount|
|From $10,001 to $50000||$10|
|From $50001 to $100,000||$50|
|From $100,001 to $500,000||$100|
|From $500,001 to $1,000,000||$300|
So, as for room 101 , sales price is 338,000 USD, buyer and seller have to buy revenue stamp of $100.————————— ⑦
This duty does not affect validity of sales contract itself.
But, if persons do not attach revenue stamp, and if tax office notices the negligence, persons have to pay 3 times amount as penalty. In this case, it is $300.
When the person attached the revenue stamp but did not affix seal and signature on the stamp, persons have to pay same amount to stipulated as penalty. In this case, it is 100 USD.
Apartment Management Fee (Kanrihi) and reserve fund for repair (Shuzen Tsumitate kin)
Next, I will explain about Apartment Management Fee (Kanrihi= 管理費), and reserve fund for repair (Shuzen Tsumitate kin = 修繕積立金).
In the case of room 101, Apartment Management Fee is 146 USD per a month.
Reserve fund for repair is 189.6 USD per month.
So, (146 USD + 189.6 USD) × 12 months = 4027.2 USD per a year ————————— ⑧
Next, I will calculate cost to rent “room 101”.
According to advertisement from Real Estate Company, rental fee will be 1,600 USD per month.
When you rent this apartment you will pay fee for the realtor.
It will be 1,600 USD.
And you will pay a gift money (Reikin= 礼金) for owner of 1,600USD.
Though you will pay a key money ( Shiki kin = 敷金) of 1,600 USD, generally it will be refundable.
Generally the rental period is 2 years.
When you renew the lease contract, you have to have a realtor make new lease contract.
And you will have to pay 1,600 USD.
Now, I will compare cost between buying room 101 and renting room 101.
Cost of buying room 101
This time, I assume that you buy this property at August 15th, 2014 and sell it August 15th, 2024.
When you sell room 101, you can receive money from the next buyer.
You own this apartment for 10 years.
I have to prospect how much percent the market price of room 101 decrease within 10 years.
This is diagram that explains chages of an apartment price.
Price of Newly built apartment = 100%, and classified into ages of building.
In comparison with age 6～11 and age 16～20 apartment, price gap is about 20%.
On the other hand, in comparison with age 16～20 and age 26～30 apartment, the price gap is about 5%.
So, I assume that there will be 10% decrease within 10 years.
（Capital loss）338,000 USD × 10% = 33,800 USD————————— ⑨
And when you sell room 101, you also have to pay a realtor fee.
The fee will be ｛ (304,200 USD × 3%)+ 600 USD ｝× 1.1 = 10,698 USD ————————— ⑩
When you sell your real estate property, you do not need to pay fee for a judicial scrivener.
But, if you have changed your legal domicile after the purchase the apartment, or you bought the apartment and used loan, you need to pay fee for a judicial scrivener.
Moreover, many of owners will buy the fire insurance when they buy real estate property.
Generally the cost will be 150 USD per a year.———————— ⑪
So, the costs to buy room 101 and sell it are as below.
11,599 USD ————————— ②
3677.37 USD ————————— ③
3144.08 USD ————————— ④
2,000 USD ————————— ⑤
3,261 USD once a year × 10 years = 32,610 USD ————————— ⑥#
100 USD ————————— ⑦
4027.2 USD per a year × 10 years = 40,272 USD ————————— ⑧#
33,800 USD ————————— ⑨
10,698 USD ————————— ⑩
150 USD per a year × 10 years = 1,500 USD———————— ⑪#
IN TOTAL OF BUYING 139400.45 USD
When you rent this room 101 in August 15th, 2014, you pay a realtor fee 1,600 USD ———————— ⑫
Gift money = 1,600 USD ————————⑬
Rent from August 15th, 2014 to August 31th, 2014 = 1,600 USD / 31 days × 17 days = 8774.1 USD———————— ⑭
Rent from September 1st 2014 to July 31st 2024 = 1,600 USD × 119 months = 190,400 USD———————— ⑮
Rent from August 1st 2024 to August 15th, 2024 = 774 USD———————— ⑯
You have to renew the lease contract at August 2016, 2018,2020, 2022 and have to pay fee for the realtor.
1,600 USD × 4 = 6,400 USD————————⑰
IN TOTAL OF RENTING 203,148 USD
According to this calculation buying an apartment is better than renting it.
I know that this is special situation because ordinary people do not have a cash of 338,000 USD .
So, they will try to borrow money from bank.
Please also refer to which is better to buy or to rent an apartment in Japan ➡.