What is the cost of purchasing a real estate in Japan?
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What is the cost of purchasing a real estate in Japan? Deposit, Down Payment, and Registration fee
There are multiple initial fees for purchasing a real estate in Japan besides the actual cost for a property. It’s important for you to check any initial cost prior of purchase, it’s not uncommon for initial fee costing from hundreds of thousand yen to a million yen. Here we will introduce cost of purchasing a real estate property in Japan.
List of initial fees for purchasing a real estate
Down Payment
Deposit
Brokerage Fee
Stamp tax
Registration and License tax
Judicial scrivener compensation
Fees and rates for each initial cost
Down Payment
Down payment is an initial payment when mortgaging a real estate. For instance, purchasing a JPY 30 million property with a down payment of JPY 5 million, you will be mortgaging the remaining JPY 25 million. For those who prefer to reduce monthly mortgage payments may increase the amount of down payment.
It’s possible to purchase a real estate property without any down payment, however, generally the down payment rate is 10-20% of the property price. Down payment should be an amount that is in a reasonable range that will not affect your everyday financial needs.
There are buyers that purposely reduce the amount of down payment in order to receive tax deduction. However, less amount of down payment may leave you with higher remaining mortgage amount when, for some reason, you end up needing to let go of your property.
Deposit
Deposit is an insurance for both parties for not canceling a deal. Since deposit is paid in advance, cancelation is unlikely to happen, and when canceled the deposit is nonrefundable.
Once a real estate sale is closed, the deposit is applied to the purchase. General rate for a deposit is 10% of the property purchase price. If an offered deposit amount is smaller than a normal rate it may not hold a strong binding as a deposit.
Furthermore, when canceled, the party who is responsible for canceling is obligated to pay double of the deposit amount.
Brokerage Fee
Brokerage fee is charged to a Seller or a Buyer. Here are the maximum limits for brokerage fee:
5% on properties costing up to JPY two million
4% on properties costing more JPY two million but not more than JPN four million
3% on properties costing over JPY four million
e.g. maximum brokerage fee for a JPY 3.5 million real estate property calculation is:
JPN 2million x5%+1.5 million x4%
=JPN 160,000
Brokerage fee for properties over JPN 4 million
Property purchase amount x 3% + 60,000 + consumption tax
Stamp Tax
A stamp tax is levied on each contract. The following amount of tax is to be paid for a stamp.
| Price on contract | Real Estate Sales Contract | Construction Contract | Loan Contract |
|---|---|---|---|
| Less than JPY 5M | 1,000 | 200-1,000 | 2,000 |
| Less than JPY 10M | 5,000 | 5,000 | 10,000 |
| Less than JPY 50M | 10,000 | 10,000 | 20,000 |
| Less than JPY 100M | 30,000 | 30,000 | 60,000 |
| Less than JPY 500M | 60,000 | 60,000 | 100,000 |
| Less than JPY 1 Billion | 160,000 | 160,000 | 200,000 |
| Less than JPY 5 Billion | 320,000 | 320,000 | 400,000 |
Registration and license Tax
Registration is a tax levied on the registration preservation. Registration fee contains separate license tax and Judicial scrivener compensation.
License Tax
It is a tax levied on the transfer of ownership or establishment of a mortgage on a property. The following is a calculation on license tax
Assessed Value of fixed assets x Tax
Amount of Assessed Value of fixed assets is a different amount from the purchased value. The license tax is a fixed rate with any Judicial scrivener.
Judicial Scrivener Compensation
The registration of real estate property shall be recorded on the public record by a Judicial Scrivener. The compensation rate differs on each Judicial Scrivener and rate ranges from JPY40,000-200,000. It is best to carefully choose your Judicial Scrivener. The amount of the compensation does not reflect the service that will be provided. It is most important to find a Judicial Scrivener that you can trust.
Summary
When purchasing a real estate property in Japan there are multiple initial fees (deposit, breakage fee, stamp tax, and Judicial Scrivener compensation). Remember to offer an appropriate amount for a deposit to avoid any conflicts.