So you are ready to be king of your own castle in Japan. Adios to the days when you, a mere rent-paying tenant of a grotty apartment, worried about landlords taking you to the cleaners for spilling tea on the carpet or making minuscule holes in the walls to pin up framed pics.

Proud homeowners can drill holes willy-nilly and spill coffee or beer to their hearts’ content! Of course, there are other sound reasons for owning your own property, too — that warm sense of “owning,” the often poor condition of rental properties, freedom to park a car, freedom from the invidious “key money” system here . . . and the low interest rates in Japan that almost always ensure that your monthly mortgage payments will be lower than your rent.

But how to go about getting a mortgage, whether for a new or preowned place in the sun?

Here’s our rough point-by-point guide to buying a residential property in Japan, with insight into some of the head- spinning legal and technical terms that homeowners-to-be must wrestle with. All Web sites referred to are in Japanese only unless otherwise specified.

Have cash ready

Unless you are awash with dearly departed daddy’s dosh, or have just won the lottery, you’ll likely be looking to buy your property through a mortgage. Generally, it’s best to pay 25 to 30 percent of the purchase price in cash (including taxes and other fees), though some lenders offer virtually deposit-free loans. Before they’ll grant you a mortgage, many banks insist your annual earnings are at least ¥3 million to ¥5.5 million.

Where to get information

Developers and real-estate agents often insert fliers in newspapers. You can also find ads in the windows of real-estate shops. Some developers, such as Mitsui Real Estate Sales Co., offer English-language services. Once you contact a real-estate agent, they will want to know areas you want to live in, what price you can afford, your ideal type of property and any other requirements. They will then point you to several properties, and likely accompany you on viewings.

Research the area

* Visit the area you are interested in at different times of day. A fancy condo in a quiet neighborhood by day can turn into a playground for bosozoku motorcycle gangs at night. Use trains so you can experience a commute.

* The availability of day care for children varies enormously with area. Some localities offer services until 10 p.m., while others accept only babies aged 1 or older. Check i-kosodate Net at www.i-kosodate.net/index.html for detailed searches of day care.

* Research the area’s earthquake risks. Some plots are cheaper than others because they are located right on fault lines. J-SHIS, at www.j-shis.bosai.go.jp/ j-shis/index—en.html , provides detailed seismic-hazard maps of Japan in English. You can type in the names of cities or train stations to find out the likelihood of the area being hit by a major earthquake within 30 and 50 years.

* Torrential rain can inflict enormous damage on a property. To give an idea of likely risk, place names can often be a useful pointer, as many relate to the location’s topography or animals or vegetation present there at one time, if not now. For example, names including tani (valley) or mizo (ditch) could point to the existence of lowlands or wetlands nearby. Place names including kawa (river), numa (marsh), hasu (lotus), sagi (heron), kame (turtle), hashi (bridge), hori (canal) or fune (ship) may similarly make it sensible to inquire further. While not comprehensive, the Foundation of River & Basin Integrated Communications, at www.river.or.jp/hazard/link/search.html has links to flood-hazard maps.

Zoning and other regulations

This is a particularly complex area, but some of the key points are as follows:

* What if you find, after moving into a new house, that the land next to yours is set to have a high-rise condo or, worse, a pachinko parlor built on it? You can find out in advance what kind of buildings are permitted to be built in your area. Ask real-estate agents for the zoning category of the property. Among these categories are dai-isshu teiso jutaku senyo chiiki (residential districts exclusively for low-rise houses and apartments, small shops and schools); and jun-jukyo chiiki (quasi-residential districts zoned for anything from houses to offices to pachinko parlors and karaoke boxes).

* Kenpei-ritsu (building-land ratio) refers to the ratio of the building’s area within the land area. If the kenpei-ritsu for your land, which is, say, 100 sq. meters, is set at 60 percent, it means you can only build a house that occupies up to 60 sq. meters on the plot.

* Yoseki-ritsu (floor-area ratio) regulates the amount of total floor space you can have. If your 100-sq.-meter plot’s yoseki-ritsu is 150 percent, and if you want to build a two-story house, you must keep the combined total area of both floors within 150 sq. meters.

Property options and some checkpoints

* A new or second-house condo For condos, pay attention not only to fancy interior features, but also to how the buildings have been and/or will be maintained, because maintenance plays a vital role in property value down the road. Condo owners join their property’s kanri kumiai (maintenance union), a self-governing residents’ group that makes important decisions on maintenance and repairs of the building(s). Be wary if the kanri-hi (maintenance fees) and shuzen tsumitate-kin (contributions to the renovation/repair fund) are way cheaper than for other similar properties.

Also be sure to check if the former owner of the land where a condo is built occupies units on the premises; even though a kanri kumiai operates on the premise of each owner having an equal stake, former landowners often have a bigger say and are often given a unit to live in and sometimes rights to lease several other units as part of their sale contract.

* Land with an existing old house on it Many plots are sold with an old house on them, and are usually cheaper than empty plots. This is because buyers are expected to pay for demolition of the existing house before building a new one. Japanese houses have a very short life span, with half demolished around 40 years after construction, according to a study by Yukio Komatsu, professor at Waseda University’s architectural department.

Masao Ogino, president of Tokyo real-estate agency Ichii Corp., points to Japanese people’s penchant for all things new. “Being new is a brand in itself,” Ogino says. “Newlyweds prefer new houses and condos.”

Be careful if such properties come with a sai-kenchiku-fuka (no new construction allowed) rule. Such rules often apply to properties with road access of less than 2 meters in width. To remove the restriction, the property owner has to negotiate with neighbors to buy or lease parts of their land — which can be very difficult if your neighbors have already built properties maximizing the legal limits of their building-land/floor-area ratios.

* Tateuri-jutaku (Buying a new house with land) Be sure to get a copy of the kenchiku kakunin shinseisho (application for construction of a new house), which builders must submit to, and have approved by, local-government or private-sector building inspectors. Then check whether what is built matches the plans submitted.

It is of course vital to be clear whether the property is on land that you must lease from its owner, or whether you are buying the property and the land it’s on. Leasehold terms vary, but basically there are two types: one allows tenants to renew their leases; the other doesn’t. The latter type, called teiki-shakuchiken (fixed-term land-leasing rights), means that after the lease expires, a tenant must either tear down their house and return the land to its owner, or the landowner buys the house from the tenant.

* Chumon-jutaku (Buying land to build a house on)

This is probably the most challenging (but potentially the most rewarding) option for home-buyers. You first buy land, then ask a builder of your choice to construct a house. You can either commission a major house-building company, a komuten (building contractor) or a sekkei-jimusho (architect’s office). You also choose whether to engage the house-builder or the contractor to both design and construct your house, or whether to have an architect design the house and then ask a builder to construct it.

Either way, it is recommended that you hire a third-party architect to supervise the actual construction progress, to protect you against shoddy work. “No one should be trusted,” a Tokyo architect noted in light of all the recent scandals involving illegal, defective condos. All housing plans need to include the name of an architect who does koji-kanri (construction supervision). You can appoint such supervisors yourself, but building contractors often enlist their own architects in this role, in which case the quality of the building work might be compromised.

* Mystical dimensions Before a house is built, it is common to have a Shinto-style ceremony called a jichinsai (literally, “a service to soothe the god of land”) on the site, to pray for construction workers’ safety. You pay a shrine priest to come over and conduct a purification ritual, with you and the construction crew present.

Make an offer

If you decide on buying a house or condo, you make a purchase offer by filling out an application form. New condos are often sold through a lottery among applicants. Detached houses tend to be sold on a first-come, first-served basis. When you apply, you often need to pay a deposit, which is returned if you entered a lottery but didn’t win. Make sure you get a receipt for this, as it will be part of your total purchase price.

Have important matters explained

Before any property transaction, a licensed broker will orally explain to you details of the property, such as its title registration, methods of payment, terms of warranty and clauses for cancelling the purchase agreement. This lengthy process, called juyo jiko no setsumei (explanation of important matters), often takes places on the day you sign a purchase agreement. Make sure you get a copy of the forms explaining important matters and read them in advance, so you can have all your questions answered.

Signing a purchase agreement

To do this, you need your hanko (personal seal), your down payment and other fees, and your Alien Registration Card.

Applying for a mortgage

* Many Japanese banks only offer mortgages to permanent residents, while others are vague on specific conditions under which foreigners qualify for home loans. But that does not mean all banks close their doors to foreigners. Mizuho Bank and the Bank of Tokyo-Mitsubishi UFJ, for example, do offer mortgages to foreigners without permanent residency, though on a “case-by-case basis.” Years of residence in Japan, a steady income, whether the applicant has a Japanese spouse and the intention of living in Japan for a long time are among factors taken into consideration.

Shinsei Bank says it lends to permanent residents; those with a Japanese spouse; and those with a permanent-resident spouse who can sign up as a guarantor for the mortgage.

The Commonwealth Bank of Australia, while offering only variable-interest-rate products, has no provision for residency status, and it lends to foreigners from countries wherever the bank has a branch. The bank also lends to foreigners living outside Japan and investing in properties here.

* Rates and product packages vary from bank to bank. There are roughly three types of mortgage. The fixed-interest- rate type allows you to pay the same interest rate throughout the entire loan period, whether 20 or 35 years, although this is likely to be above the current lowest rates. In the variable rate type interest rates change in line with market fluctuations. Another type fixes the interest rate for the first few years, then switches to the variable rate.

* Most Japanese banks require mortgage buyers to take out group life insurance, whose premiums will be built into the monthly repayments. This insures against the buyers’ loss of income in case they become severely disabled or die while their loans are outstanding. Many mortgage lenders also insist on you taking out fire insurance, and sometimes earthquake insurance.

Then, at last . . . The property must be registered as yours by a shiho-shoshi (judicial scrivener). Make sure you keep the proof of the registration, as you will need it to resell the property later.

You will then receive the key to the property!


Ju Map (tips of all kinds, from loan simulators to links to other sites): www.jhf.go.jp/jumap

Architects’ plans (links to various architects and their designs): plan.weekend-homes.com

Center for Housing Renovation and Dispute Settlement Support: (03) 3556-5147; www.chord.or.jp/index.html

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