Regulations

YouTube clip : Capital gain tax in Japan

When you buy a property and sell it in profit in the future, you are liable to

the capital gain tax of the Japanese government whether you are in

Japan or overseas country.

How does it work ?

How much is tax ?

Please find out more details in my video below.

Toshihiko Yamamoto
Real estate investing consultant and author.
Founder of Yamamoto Property Advisory in Tokyo.
International property Investment consultant and licensed
real estate broker (Japan).
He serves the foreign companies and individuals to buy and sell
the real estates in Japan as well as own homes.
He holds a Bachelor’s degree in Economics from
Osaka Prefecture University in Japan
and an MBA from Bond University in Australia

Toshihiko’s book, “The Savvy Foreign Investor’s Guide to Japanese Properties: How to Expertly Buy, Manage and Sell Real Estate in Japan”is now out on Amazon, iBooks (iTunes, Apple) and Google Play.
About the book 
Amazon.com Link

 

 

Can foreigners buy a property in Japan ? : Fundamental rules when acquiring a property

Interested in buying a property in Japan where the country risk is lowest in the world ?
Japan is a rare Asian country insofar as it allows foreigners to buy a property. Foreigners can buy both land and building without special qualification. When it comes to buying a property here, Japan has very few restrictions than the Western countries.

Ownership rights to land and building in Japan by a foreigner is also permitted just like Japanese citizens.

When a registrar has made a registration of ownership with respect to a real property with Legal Affairs Bureau, he/she shall can officially claim the title deeds of the property. However, there are restrictions on agricultural land (farmland). You need to get prior permission from a local agriculture committee (nogyo-iinkai) or governor when you buy the farmland. At least one corporate manager (one member of new owner) has to engage in full-time farming. In other words, if you want to buy farmland, you must become a farmer. The

Read more

Controversial Japanese Government’s new immigration policy: PM Abe uses the acute labor shortage to push for relaxing the immigration law

(A view from Japanese kominka house, folk house)

Japan is facing the serious shortage of workforce and ageing problem.
How should this country cope with a serious population decline and sustain the vitality of its society and economy?
According to Yomiuri shimbun, the overall shortage is estimated to be 580,000 at present, and was projected to reach 1.45 million five years from now. After subtracting from these figures increases in the number of elderly and women workers and the like, a maximum of 47,000 foreign workers will be accepted in the fiscal year when the planned revisions of the immigration control law take effect, and up to 345,000 over the five years from the revisions.
The government and the ruling camp, led by the Liberal Democratic Party(LDP), will now shift their focus to a key bill to revise the immigration control law and create new residence status in order to allow Japan to accept more foreign workers.Time employed under new visas won’t count toward working period requirement for permanent residency.
The Justice Ministry does not intend to count time spent employed under one of two new visas set to be introduced spring 2018 when checking whether those who apply for permanent residency status meet requirements.One of the prerequisites for permanent residency in Japan is having five years of work experience in the country. But according to the sources, those working under the new proposed visa status — which will be available to individuals with considerable knowledge or experience in areas where human resources are lacking in the nation – will not be able to cite time spent under this status as working time when they apply for permanent residency.
The new visa, along with another type intended for individuals with more seasoned skills in areas similar to those under the first type, is aimed at making up for labor shortages in certain job categories, and will open the door to more foreign blue-collar workers.
In the meantime, the ministry is still considering how to handle time spent working in Japan under the second type of visa.

(Hakuba, Nagano prefecture)

Read more

Buying a house in Japan ? Here’s all-too common mistakes to avoid


We don’t need to tell you about the brilliance of Japan quality: detailed, good service and competitive price etc etc.  
But for how good Japan quality in general is, it’s equally easy to screw up. Badly.
Japan’s real estate industry and construction industry are full of fraudulent companies.
A number of them are rogue (of course, there are good and trustworthy companies, too.)
You need to be very careful to deal with them.
When you build your brand-new house in Japan, you must be extra mindful because it could be a disaster if it goes wrong.
It is widely known to the industry professionals that the laws are not necessarily protecting the consumers
(customers).
Why is the owner (consumer) in so disadvantageous position ?

There are five main reasons.
1.The industry is not seeking a repeat business so they don’t look after customers well
2. High overhead cost
3. The related laws have many loopholes
4. The owner(customer) trusts the contractor  (real estate agents and builders included) too much
5. Victim’s tragic stories are not widely reported in the media.

Read more

You want to get Japan’s green card by the real estate investment ? : Here is what you practically should do

Here is an idea worth considering. Imagine being able to get Japan’s new green card only in a year.
Japan needs more skilled foreign workers.
To attract more foreign workers, Japanese government relaxed requirements for permanent residency (so-called green card) last April (2018)
Before relaxing the requirement, high skilled professional (HSP) workers had to stay in Japan for at least five years before applying for green card, but now just one year is required.
In fact, it is the fastest green card system in the developed countries.
Some pundits are saying relaxed law will bring more foreign high skilled workers but whether it will be a game-changer remains to be seen.
Japan is also said to be a tough country for foreign workers to live due to the very unique traditions such as corporate culture and seniority system, which is another hurdle to clear even after obtaining the green card.
In 2012, Japan introduced a point system for skilled workers. The points are given based on individual backgrounds, including business experience, income, Japanese-language fluency and academic degrees. The system is intended to give preferential status to such skilled workers, including a shortened path for permanent residency.  When the system was enacted, those who had 70 points or more could apply for green card after five years. Normally, it takes 10 years to apply for the status.

Read more

Fast track for permanent residency for highly skilled foreigners :Japan’s Groundbreaking New Green Card system


Japan dramatically relaxed Green Card system !
Bold new opportunity to obtain Japan’s new Green Card.
Are you interested in Japanese Green Card with Japan’s social security and universal healthcare service ?
Here is what you should do. 
Invest in the property here and get the ‘business manager’ status.
Japan is facing the acute shortage of workforce.
To address the issue, Prime Minister Abe has been drastically relaxing the immigration control for both low skilled workers and high skilled professionals.
Japan needs both low skilled workers as well as advanced skilled managers.
There is a new visa category called Highly-Skilled Professionals (HSP).This new category was relaxed dramatically last year and now Japanese government is offering preferential treatment for the category, which makes applicants much easier to apply for the so-called
‘GREEN CARD’.

In this relaxed category, HSP can apply for ‘GREEN CARD’ earliest within ONE YEAR (subject to your points) after you
get status of HSP. The Green Card application procedure is based on the points-based system.
The new approach follows the government’s introduction of a point system for highly skilled professionals in 2012.
Under this system, people are scored according to factors such as academic background, career background and annual salary, and are categorized under the field of “academic research,” “technical activities,” or “business management.”Read more

A solution to the hotel shortage ? New minpaku (民泊, private lodging) law in Japan : How does it work ? and how can you tap your property ?

I have a friend who has enjoyed hosting international visitors in Tokyo in her
own condo.
She has been hosting international visitors in her spare two-bedroom apartment
but will have to stop it because her building association (管理組合)has decided to
ban the minpaku business ahead of the law’s
enactment in June 2018.
She was able to meet many different people she would have not met otherwise.
A lot of foreign friends have been asking me a question about minpaku (民泊、private lodging) in Japan.
Today I am going to discuss the basic knowledge about minpaku and minpaku law
set by the government in 2016.
How does the new minpaku law work ?
What is the implication on the real estate industry ?

Read more

How to avoid mistakes when choosing a real estate agent -Perennial Ryote-torihiki(両手取引) and Kakoikomi(囲い込み) problem-

 

As the book ‘Freakonomics’ (2005 by Steven Levitt and Stephen J. Dubner.) describes

“information is a beacon, a cudgel, an olive branch, a deterrent―all depending on who wields it and how.

It is common for one party to a transaction to have better information than another party.

In the parlance of economists, such a case is known as an information asymmetry.

If you were to assume that many experts use their information to your detriment, you’d be right.

Experts depend on the fact that you don’t have the information they do.”

A real estate agent may see you not so much as an ally but as a mark.”

Too fazing?

Like in the US, many Japanese people believe that the real estate industry in Japan is quite shady.

All the real estate agents are strictly regulated by Building Lots and Buildings Transaction Business Act for both

rent and sales.

The regulations say ‘a Designated Examination Body must appoint examiners to administer qualification Examinations for Real Estate transaction specialists

(hereinafter referred to as “Examiners”) from among persons satisfying requirements as specified by an Ordinance of the Ministry of Land, Infrastructure, Transport and Tourism and have Examination questions prepared and marked.’

To become a licensed broker, one needs to pass the exam.

Some specialists call themselves ‘real estate consultant’ because they are not licensed.

They are not unlawful, but unlicensed brokers are not allowed to lure any investment and not allowed to become the intermediary

for the transaction.

In the meantime, technically speaking, listing agents could control all the information in multiple offer situations.

Efforts by regulators to increase transparency in the real estate industry have been made continuously and every year regulators issue

the new legislation.

With greater transparency, consumers theoretically can also be more confident of their decision to engage agents, and be able to select the agents who best meet their requirements.

How transparent is the industry in Japan now?

Do you think big names like Mitsui or Sumitomo will see you

as an ally?

The short answer is ‘no’.

In general, buyers have one representative in the transaction and sellers have another.

The sides negotiate back-and-forth towards a deal that would be acceptable to both principals but whose outcome depended on the quality of their representation and negotiation.

Representing both sellers and buyers of the property at the same time is called a double agent in real estate parlance,

it is called a dual agent.

It is called in Japanese 両手取引(ryote torihiki) or ‘double-handed’ transaction by the industry jargon.

If your agent is representing either side only, it is called 片手取引(’katate torihiki’ or ‘single-handed’ transaction)

Dual agency is not illegal in Japan but highly controversial.

Why?

Dual agents are supposed to protect the interests of both parties.

The buyer and seller have diverging goals and are both represented by the same agent or brokerage firm

(who has a great incentive to see the deal completed).

Imagine what would likely to happen?

Yes.

Conflict of interest.

It is very common in this type of deal.

Obviously, the buyer wants as low a price as possible, and the seller wants the opposite.

Like all other developed countries,  real estate agents in Japan, including myself, work on the commission basis for the transactional business.

(I often work as a real estate consultant who is based on a fee)

The statutory rate for the transaction is maxed 3%(of the property price)+60,000 yen.

The problem is that the agent only stands to personally gain an additional $300 (3%) by selling your property for $10,000 more,

which isn’t much reward for a lot of extra work.

It is not solely the fault of the agents, but I venture to say it is a system failure.

In economics parlance, it is called the ‘agency problem’.

Particular incentives and incentive structures explain a very great deal of the financial world which swirls around us.

In capitalism, people respond to incentives and to their opposite, disincentives.

You can’t blame people who are acting very human.

Therefore when you are selling or buying the property, you need to understand the incentive structure which swirls around the industry.

In this sense, you may want to be extra careful if you wish to negotiate the brokerage rate with your agent.

By hammering their brokerage (by giving disincentives),  your property would promise the detriment.

Again it is human nature.

One article in the magazine called ‘ZAI’ in November 2017 by renowned Japanese Diamond publishing company actually

grabbed the media attention by revealing the estimated double-handed transactions.

According to the estimate, the prominent

names like Mitusi,  Sumitomo, Tokyu, Nomura are apparently engaging very actively in the double-handed transactions.

Please see the numbers below. (I listed only 10 companies out of 20 companies)

These are the estimated commission rate which each prominent real estate company generated between 2014 and 2016.

Mitsui Fudosan Realty Network 5.39%

Tokyu Livable 4.15%

Sumitomo Real Estate Sales 5.23%

Nomura Real Estate Group 3.74%

Mitsubishi UFJ Real Estate Sales 3.67%

Century 21 Group 4.40%

Mitsui Sumitomo Trust Real Estate 4.04%

Mizuho Real Estate 3.33%

Daikyo (a part of ORIX group) 4.69%

Odakyu Real Estate 4.43%

* Estimate is based on real estate distribution data of the Real Estate Distribution Promotion Center (They serve as a public interest incorporated foundation)

The estimated commission rate is based on the fee income

announced divided by the transaction volume (sales volume).

I don’t have access to the information source of Real Estate Promotion Center but tried to verify the commission which ZAI magazine released

by analyzing the financial report announced by a few of these companies.

And I landed at 5.1 % for Sumitomo, 4.5 % for Daikyo and 6.5% for Century 21.

And yet, the controversial article by ZAI looks reasonably accurate.

As you can see from the estimated commission rate of the major real estate companies are exceeding 4%, and a few companies are enjoying more than 5% commission rate.

This is most probably because they boast the relatively high commission rate working as ‘dual agents.’

It is illegal if a real estate company intentionally crafts two-hand transactions by concealing the property information without any prior agreement with the seller.

Unfortunately, in Japan’s real estate industry, you often encounter dubious double-handed transactions.

How can they craft such dubious deals?

As a matter of fact, their method is very simple and classic.

The industry has the database system called ‘REINS’ where all the agents list each property when they enter into the intermediate agreement with the seller or buyer.

Once the property is listed with REINS, all the

licensed brokers can access the database and look for a property they seek.

However, even the property is registered with the REINS system, the current rules allow the space for manoeuvring by the seller’s agents.

When sellers agents receive an inquiry from a potential buyer, they can they simply say

“The property has been already closed or under negotiation”.

It is very difficult for the principal parties to know the actual dialogues between sellers agents and buyers agents.

It is called 囲い込み (kakoikomi or boxing)

Kakoikomi by intentionally concealing the information is a violation, but sadly such kakoikomi is common.

The rogue real estate companies consistently disregard the inquiries from buyers agents and wait until sellers compromise the price.

For the seller, kakoikomi creates a significant opportunity cost.

Sellers miss opportunities to sell early.

Also, even they could be left only with the option of lowering price.

Remember the agents can gain only an additional $300 as a brokerage even they work hard and manage to sell your property $10,000 more.

Here classic ‘agency problem’ can be seen on a flip side as well.

The agents do not lose much money by lowering

your property price by $10,000.

Moreover, sellers agents can gain more by crafting the double hand’s transactions even the price is lower.

Unfortunately, the double-handed transaction is extensively practised in Japan.

Why do we have controversial double-handed transactions even though they look so dubious?

First,  dual agencies are not prohibited by law.

And I said earlier the dual agency is very prone to

the conflict of the interest.

Second, it is almost impossible for the consumers to verify if competing offers are actually registered or not if agents are divulging offers to their clients.

On the other hand, even if it is an intermediary company on the side of the buyer, even if it is registered in REINS and looking at the information and applying to the real estate brokerage company on the seller side, he could say, the property has already entered into contract negotiation.”

It is easy to imagine that a strong incentive to do kakoikomi for real estate companies and salespeople who want to increase commission income.

The transparency is a huge issue.

To avoid such kakoikomi, what can you do?

Is it a good idea to go to a small to medium-sized real estate agents?

In my experience, it is not really a matter of

credentials of the company but who your agent (salesperson) is.

The real estate industry often is regarded as the

bunch of small non-corporate shops.

The business model of the agency is so simple, and once you gain the skills of sales and communication, they can enjoy the freedom in corporate life.

What matter is the individual performance, not the brand of the company?

What about medium and small-sized real estate brokerage companies?

The size of the company does not matter much.

Even if it is not a major real estate brokerage company, by posting the property information on the internet,

there is a good possibility of finding a seller.

Also, there are local and small real estate agents that are strong in certain areas, and they tend to have a lot of property information and information on local buyers.

They have a strong connection with the landowners and landlords of the areas.

The most important thing you need to remember is that the sellers (and buyers) should ask agents a few questions including double-handed transaction

to assess the integrity and attitude of real estate brokerage firm or sales representatives.

You do not know if their answer is genuine; however, at least, by asking such questions you will look sophisticated and don’t look like a mark for the agents.


In conclusion, here are some tips about how you can avoid pitfalls in Japan.

・Notable brands are not the guarantee of the quality of the service.

When you choose the agents, you also need to choose a person in charge of your property.

If you are not happy with a person for some reason, please ask the manager to change the person.

・Try to avoid a salesperson who is overly pushy.

They may keep sending information of the properties even if they don’t match your criteria.

He or she may just be desperate to make a transaction.

・Internet is the currency of the internet. It compresses the gap between experts and consumers.

Please do your homework by studying the relevant information on the web sites service like

AT HOME or SUUMO before you choose your agents.

It is recommended that you interview a few agents before choosing your agent.

Each agent should have strengths in their sales and marketing.

Please ask your agents if they are willing to make a deal by the single-handed transaction.

They could try to craft the double-handed transaction, but your question will give them good pressure.

・Choosing agents who offer the lowest commission rate is not a necessarily good idea.

By choosing such an agent, your property could lose priority in their mind. Reduced commission means reduced marketing effort.

It will negatively affect your agents.

・Look for someone who is committed with integrity.

Integrity is always a key for success from a business perspective.

・Make sure your agent is focused on the value, not just the price

Your real estate agent should be able to accurately estimate the value of your property and set up a price that accurately reflects the value.

Moreover, when you are briefed the estimated price, please ask them the logic and story they sell.

両手取引 (ryote torihiki, in Japanese)

囲い込み(kakoikomi , in Japanese)


(Shimanto river in Kochi pref)

Toshihiko Yamamoto
Real estate investing consultant and author.
Toshihiko is currently writing a book about real estate investing in Japan
for foreign investors.  About the book
Founder of Yamamoto Property Advisory in Tokyo.
International property Investment consultant and licensed
real estate broker (Japan).
He serves the foreign companies and individuals to buy and sell
the real estates in Japan as well as own homes.
He holds a Bachelor’s degree in Economics from
Osaka Prefecture University in Japan
and an MBA from Bond University in Australia 

 

 

What is the 2022 problem in Tokyo property market ?


Some critics in the industry are predicting the price of condominiums in Tokyo shall drop soon simply because they are too expensive for people to buy.
According to Nikkei in December 2017, the average price of a newly built condo in the capital region — Tokyo and the surrounding prefectures of Kanagawa, Saitama
and Chiba — rose 7.6% in 2017 to 59.08 million yen ($533,000).
That was higher than the average in 1989 and 1991 and the second-highest level ever,
trailing only the 1990 record by 2.15 million yen.
Are condominiums really too expensive ? Are those critics are right ?
We need a crystal ball to predict the future
but today I am going to discuss the reason why the price of condominiums may go down.
Personally though, I am still mildly bullish about the market right now due the global aspect (see below UBS report)
and the  healthy growth of the secondhand condominium market.

It is always to good to listen to the people with different opinions.
Let’s listen to what  critics have to say.
We saw the condominiums developers go bankrupt one after another in the recession after the global financial crisis in 2008.
Nonetheless, the current price of newly built condominiums in greater Tokyo area has risen up sharply over several years and they are becoming more and more unaffordable for average salaried workers.
In the latest Tokyo kantei report in 2017, the average price of new condominiums are about 8-10 times higher than average annual income of the skilled workers in greater Tokyo area.(vs. 14 times in London)
London house price
The reason for raising is not because real demand is strong because everyone wants to buy them.
Read more