Why did I decide to buy a house in Japan?
I have been living in Japan for 6+ years and have been renting a 1K (one room, kitchen) apartment since I arrived. The apartment is located near a train station and was just 10 minutes walk from my office, allowing me to wake up pretty late and still get to work on time. However, I made the decision to become a house owner towards the end of 2015. Of course, credit goes to my mother for planting the idea in my head to actually own property. With rentals, the money I pay to the landlord will not return as a tangible asset. Whereas, when I buy a house and even if I borrow from the bank, that property will be mine. Provided if it is freehold of course. Should I retire, I will have a roof over my head even if I am not working anymore. Should I leave Japan, I can sell the property and at least get some money back, or I could rent it out as a potential source of income.
And of course, I have started to accumulate more things than I can keep. I also wanted a bigger kitchen. So I was ready to move out, but I did not want to deal with landlords who may reject me for the sole reason of being a foreigner (yes, this may happen) and to deal with key money (an extra month’s rental every 2 years). It was also a good time to jump into the property market. The interest rates in Japan are negative now. Keeping money in the bank means you will be paying to keep every yen there. Japan is trying to stimulate their economy by encouraging spending. Japanese are very frugal people and tend to have quite a bit of savings. In response, the banks are also trying their best to give out loans. At the end of 2016, the home loan interest rates was less than 1%. Also there is a planned GST increase from the current 8% to 10% soon. That 2% is alot of money when it comes to big purchase.
Why a landed house and not an apartment/condominium (Japanese call these as mansions)?
Some people (especially my Japanese friends) have asked why I decided on a house. The truth of the matter was that when Japan’s housing bubble burst in the 90s, the housing market has never been the same. The building itself, will depreciate from day 1 of the handover. Houses are generally built to last a single generation and have a lifespan of 25-30 years. Japan, the land of earthquakes, also frequently updates their building codes. Land however, can appreciate. So as an investment, the most valuable thing is the land.
I then did some research into buying property in Japan. I read blogs of other foreigners who bought/built their own houses, among them, Danny Choo http://www.dannychoo.com/en/post/515/Tokyo+Property+Purchase.html and a very detailed documentation at https://gaijinhouse.wordpress.com/. I also bought a book entitled “Landed: The Guide to Buying Property in Japan” http://landedbook.com/landed-japan/. Buying property in Japan is very different from Malaysia and this helped me with what to expect and what to look out for.
Engaging A Real Estate Agent
To get things started, I had to engage a Real Estate Agent. My company engages a nearby agent, and their office is right next door. A real estate agent will help source for properties for you to go through, take you to visit said properties, and to facilitate almost everything. In general, there will be the buyer’s real estate agent and the seller’s real estate agent. Although my agent doesn’t speak much english, I do recommend you engage one that does if you are not proficient with Japanese.The agent asked for the criteria of the property I am looking for and based on that information, he set out to find some property for me to consider. At that time, I was in the market for pre-owned houses as well. Also the Real Estate Agents have access to a database of property listings. From that database, he/she would be able to recommend some property for me.
I would need to have a bank loan in order to pay for the house, so I asked around to a number of banks. However, as I am not a PR holder, I was rejected from all but 2 banks. And even then, I would be only allowed to borrow up to 70%. Citizens and PR holders can apply for 100% loans. Only MUFG (Mitsubishi UFJ Financial Group) and PRESTIA (SMBC Trust Bank) would consider me. Of the two, I selected PRESTIA (https://www.smbctb.co.jp/en/loan/index.html).
PRESTIA is the only bank that bothers providing English language support. Their staff speaks english, they have english websites, the documents will have supportive english translations (which are not legally binding). MUFG will have none of those. Also I have an account at PRESTIA as they were acquired from CITIBANK by SMBC. I highly recommend PRESTIA as I found them very helpful.
Searching for a Property
Over a few months, I went around visiting some property that fit my criteria. To my dismay, many preowned houses were pretty old. There was one that had an awesome garden, but had tiny steps for the staircase. Another I did not like too much because it was located directly under high tension electrical cables. Eventually my agent showed me a brand new house that hasn’t been sold yet. At first I could not believe it. The price was about the same with the preowned houses I have been seeing, but because it was brand new, the worries of having a building that needs repairs/remedial work all vanished. The fixtures that come with a brand new house is pretty impressive as well! Back in Malaysia, I would have to renovate the kitchen and bathrooms as they would just provide the most basic ones possible. That’s not the case in Japan though. The kitchen would have the kitchen counters, stove and hood all installed. The bathrooms will have the bathtubs and shower and powder room installed. The toilets even come with the famed Japanese toilet seats.
Eventually I decided I wanted to book that house. So the agent put together all the documents I would need to send to the bank for a loan approval and I sent it over to bank for approval. Alas, during that time, that house was taken off the market as someone had booked it. So it was back to searching for houses. After a few weeks, I eventually found a particular listing at a japanese property listing portal called Suumo (http://suumo.jp/). I went to address of the houses to check out the location, found that although it is pretty far from the train station, it was a nice residential area. I passed the information to my agent and he got more information about the properties in question. There were 6 different lots being built and my first choice of the six was also booked out, and I settled for my 2nd choice.
Booking the Property
To lock in the property, this time I went ahead with the process of paying a deposit before the bank loan was officially approved. In my case, the booking fee was 500k for the land and 500k for the house. There was a clause in the booking that the money paid can be refunded should the bank loan fall through. Soon a meeting was scheduled and held at my agent’s office. Together with the agent of the property seller, we go through the details of the house and the terms and conditions of the sales and purchase agreement. After signing the S&P the booking fee is paid and the S&P is handed over.
With the S&P in hand, the loan application to the bank was once again made. From the application to approval takes a few weeks. The bank gave me their offer and the estimated payment schedule based on the current rate, however the rate will only be be finalized on the month of the disbursement of the loan. However, because I have no guarantors for the loan, I am required to sign up for life insurance with the bank.
While waiting for the house to be built, I was presented some options for the house. I could make a selection of colours for some of the fixtures.
- Bathroom (wall colour, floor colour, tub colour, shelf colours)
- Toilet (toilet colour, model selection)
- Floor, Floor Skirting (wood colours)
- Cabinet, Doors (design and colours)
- Kitchen (panel colours, countertop material)
Although the agent provided catalogs to help with the selection, he advised I visit the showrooms of each of the different vendors of said fixtures to see for myself. And that is what I did on that weekend. Later on I would give my selection. I was also given the option to add / move electrical/telephone/networking outlets for additional add on costs. However, based on the plan provided, it was adequate, so I did not opt for it.
I did want to add a solar panel system to the house though. Electricity in Japan is pretty expensive so saving on electricity and the potential to sell surplus renewable energies back to the utility company would shorten the return of investment and reduces my carbon footprint. So I asked the seller to quote a solar panel system from Panasonic to me. And it was price was quoted and we agreed upon it.
Overall the construction of the house was pretty quick, within 3 months, it was built from foundation up.
Handover and Loan Disbursement
As the handover date loomed closer, PRESTIA would require me to sign the final Loan Agreement contract with them. They sent a checklist of documents I would be required to bring and I went to the Home Loan center in Shinjuku for the signing. This process took about 2 hours. On the handover date, a meeting was held at my agent’s office with all parties meeting together. The final explanations were gone through, in particular the details of the land parcels and ownership details. Then it was time for the loan disbursement. PRESTIA’s representative gave the green light to the bank to disburse the loan and all other parties who were expecting payment waited until their finance departments confirmed the money has gone in. When everyone is satisfied, receipts were issued and the keys were handed over.
By right, this normally is done before the handover. I caught the flu from one of my overseas trips and was under quarantine orders. The agents from both sides accompanied me to the house and we checked for defects. There was no major defects spotted, just a few minor things like an alignment of a door, gaps between panels. After, they would be given 10 days to fix it up. During that time, they would be using the construction key, so my keys would cannot be used until then.
This is not included in the loan disbursement but is a requirement by the bank. Fire Insurance can be bought for multiple years and is cheaper if bought for more years at a time. Payment is upfront. So that’s some extra cash that I had to have in hand. I purchased Fire Insurance for 10 years and it comes with Earthquake insurance for 5 years. I’d need to renew the Earthquake insurance separately when that time comes.
Hope this helps!
Contributor : Fabian Chong
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