Japanese land prices are rising for the first time in 30 years and early investors are increasingly buying homes and properties at very promising rates. Japan offers a unique opportunity for foreign buyers seeking lifestyle, vacation, rental income, or legacy investments. The country boasts new luxury condos in Tokyo and a vast supply of beautiful and undervalued homes, farms, companies and resort properties. There are even quite a few golf courses and ski areas available for what a decent condo in Miami costs. Notably, Japan is the only Asian country where foreigners can own land outright without local partners, thanks to its safe and standardized property laws.
The Japanese yen is one of the world's safest currencies and is currently at a multi-decade low, enhancing purchasing power for foreign investors. Land prices, which had been stagnant since the post-bubble era, are now beginning to rise. According to the Ministry of Land, Infrastructure, Transport and Tourism, nationwide land values have climbed by 2.3%, with residential land prices increasing by 2.0% and commercial properties seeing a 3.1% rise. In Tokyo's 23 wards, commercial land values have risen by 7.0%, building on the 3.6% increase seen in 2023. Niseko, a renowned ski resort area, has experienced significant growth, with land prices soaring to about 14 times their 2014 value, from $333 per square meter to $4,800 in 2020. (Uchi Japan)
The team at Eden Homes has 25 years of experience in land, homes, and resort properties. From property sourcing to architectural design and construction, as well as long-term property management and financial oversight, they work directly with clients in every aspect. Eden Homes provides advice and an expert team of finance and tax professionals to assist with financial management, visa and residency applications, and Japanese National Health Care registration services. They have provided the following guide as an easy reference for clients wanting to understand the process of buying a home in Japan. For more information, visit their website: Eden Homes.
Understanding Property Taxes in Japan: A Guide to Fees and Tax Rates
Japan's property tax system is unique and crucial for owners and investors. It differs from other countries in several ways. Let's explore how property taxes work in Japan.
In Japan, property taxes are based on the local council's assessed value, which is usually lower than the actual sales price. Property taxes typically amount to about 1% of the sales price.
Japan has several property taxes that impact property owners:
Fixed Asset Tax: 1.4% of the property's assessed value.
City Planning Tax: 0.3% of the property's assessed value.
Real Estate Acquisition Tax: 3-4% of the property's assessed value.
Registration and License Tax: 0.4-2% depending on the transaction type.
Stamp Duty: Varies based on the transaction value.
Example: Property Price ¥50 Million (Approximately $450,000 USD)
Property Tax | Amount (¥) | Amount ($) |
Fixed Asset Tax (1.4%) | 700,000 | 6,300 |
City Planning Tax (0.3%) | 150,000 | 1,350 |
Real Estate Acquisition Tax (4%) | 2,000,000 | 18,000 |
Registration and License Tax (1%) | 500,000 | 4,500 |
Stamp Duty | 60,000 | 540 |
Total | 3,410,000 | 30,690 |
Note: USD amounts are approximate, based on an exchange rate of 1 USD = 111 JPY.
Regional Variations in Property Taxes
City planning tax rates vary across Japan, reflecting different urban development needs. Some regions offer tax incentives to attract businesses and encourage growth. For example, companies relocating headquarters outside Tokyo may qualify for tax breaks, which can impact property values and investment decisions.
The city planning tax contributes to annual property expenses and neighborhood development, ultimately helping create desirable living environments. Over time, this tax may increase property values by improving infrastructure and community appeal.
Real Estate Acquisition Tax: One-Time Fee for Property Buyers
Buyers in Japan pay a one-time real estate acquisition tax when purchasing property. This tax applies to buying, constructing, gifting, and exchanging properties. The tax rate depends on the property type:
Residential property and land: 3% tax rate
Commercial property: 4% tax rate
The local tax office calculates this based on the property's assessed value. Additional costs buyers should prepare for include:
Brokerage fee: 3% for properties above ¥4 million, plus a ¥60,000 fee and consumption tax
Stamp tax: Ranges from ¥10,000 to ¥480,000, depending on the property price
Registration and license tax: Applies during property transactions
Withholding tax: 10.21% imposed at the time of property acquisition
The real estate acquisition tax is usually due 1-2 years after purchase. Some reductions may apply for newly built or acquired residential properties.
Registration and License Tax: Transferring Ownership
Understanding the registration and license tax is crucial for property buyers in Japan. This tax applies when transferring property ownership, establishing a mortgage, or preserving ownership rights.
Tax Rates and Calculations
Taxable Value | Registration Tax |
Up to ¥1 million | ¥5,000 |
¥1,000,001 - ¥5M | ¥10,000 |
Property transfers | 2.0% |
Land registration | 1.5% |
These rates are lower for newly built homes or specific circumstances, making registration costs an essential factor when purchasing property.
Farm Land and Tax Exemptions
Agricultural land, known as "Nochi" in Japan, is widely available and highly fertile. Individuals or companies willing to engage in farming can access significant opportunities in this sector. Eden Homes provides services to assist investors and businesses in acquiring and utilizing farmland.
Agricultural land in Japan is protected and benefits from reduced tax rates. It is often assessed at a much lower value than residential or commercial land, making agricultural business investment an affordable and strategic option.
Tax Rates for Farmland
Tax Type | Rate | Assessment Frequency | Application |
Fixed Asset Tax | 1.4% (standard) | Every 3 years | Land, housing, commercial buildings |
Farmland Fixed Asset Tax | 1.4% on 55% of value | Every 3 years | Agricultural land |
Farmland is taxed at only 55% of its market value. This tax incentive supports Japan’s agricultural sector, which contributes 1.1% to the country's GDP. Farms cover 36% of Japan’s habitable land, reinforcing the government’s commitment to food security and rural development.
Conclusion
Thank you for reading through all these details! Don’t worry if you’ve forgotten some of it—just reach out to us, and we will guide you through the entire process with ease. Japan presents an excellent investment opportunity, with incredible properties available, from luxury city condos to scenic rural retreats. Contact us with your dream property type, and we will help you find the perfect home in Japan.
