How Much Does It Cost to Own a Home in Japan? A Comprehensive Guide for Future Homeowners
Buying a home is a major financial decision and an aspiration for many individuals and families. However, the costs associated with owning a home can be confusing and daunting, especially in Japan, where property prices and associated fees vary greatly by region. Whether you’re planning to build a custom home or purchase a pre-built property, it’s essential to understand not just the upfront costs, but also the long-term expenses involved. This blog will walk you through the average costs of owning a home in Japan, the necessary income, various types of homes, and the associated maintenance costs to help you make an informed decision.
1. Understanding the Average Cost of Buying a Home in Japan
A. Average Home Purchase Costs
When purchasing a home in Japan, you’ll be dealing with more than just the price of the house or land itself. There are additional costs, such as taxes, fees, and future maintenance, that need to be factored into your budget. The 2021 Flat 35 User Survey conducted by the Housing Finance Support Organization provides valuable insight into the average cost of buying homes across different regions in Japan. Let’s take a look at these averages:
Nationwide Averages:
Custom-built homes with land: ¥44.55 million
Pre-built homes: ¥36.05 million
Tokyo Metropolitan Area:
Custom-built homes with land: ¥51.33 million
Pre-built homes: ¥41.33 million
Kinki Region (including Osaka):
Custom-built homes with land: ¥46.58 million
Pre-built homes: ¥35.78 million
Tokai Region (including Nagoya):
Custom-built homes with land: ¥43.79 million
Pre-built homes: ¥31.39 million
Other Regions:
Custom-built homes with land: ¥39.80 million
Pre-built homes: ¥29.05 million
These figures reflect the cost of both land and the building itself, and as expected, property prices in metropolitan areas, particularly Tokyo, tend to be higher due to the cost of land. If you’re looking at homes outside of major urban centers, the cost will generally be lower.
B. Breaking Down the Purchase Costs
Aside from the purchase price of the house, there are additional costs that must be considered. Here’s a breakdown of common costs when purchasing a home in Japan:
Real Estate Agent Fees: Typically 3% of the property price, plus ¥60,000 and consumption tax.
Stamp Duty: Between ¥10,000 and ¥30,000, depending on the price of the property.
Property Registration Tax: This is 0.1% to 2% of the property’s fixed asset tax evaluation.
Judicial Scrivener Fees: Around ¥100,000 for handling legal paperwork related to property registration.
Real Estate Acquisition Tax: Approximately 3% of the property’s fixed asset tax evaluation, though exemptions may apply for newly purchased homes.
When buying a pre-built home or a custom-built home with land, expect these additional costs to total around 6% to 12% of the purchase price. If you already own land and are only building a home, the fees may be slightly lower, around 3% to 6%.
2. What Annual Income Do You Need to Buy a Home in Japan?
A. Necessary Annual Income for Homeownership
A key factor in determining whether you can afford to buy a home is your annual income, as most people rely on a mortgage to finance their purchase. As a rule of thumb, financial experts recommend that your annual mortgage payments should not exceed 25% of your annual income. Based on this, let’s calculate the income needed to afford a typical home.
Custom-Built Homes with Land
The national average cost for a custom-built home with land is ¥44.55 million. Assuming a 35-year mortgage at a 1.5% fixed interest rate with no down payment, the monthly repayment would be approximately ¥136,405. To keep your mortgage payments within 25% of your annual income, you would need a yearly income of roughly ¥655,000 × 12 ÷ 0.25 = ¥6.55 million.
Pre-Built Homes
For a pre-built home costing ¥36.05 million, the monthly mortgage payment would be approximately ¥110,379 under the same loan conditions. This would require an annual income of approximately ¥5.30 million.
B. The Impact of a Down Payment on Affordability
The examples above assume no down payment, but if you can put down 20% of the property’s value upfront, your mortgage payments and the required income will be lower. Saving for a down payment can significantly reduce the financial burden over time.
For example, with a 20% down payment on a custom-built home with land, your required mortgage would drop to ¥35.64 million. With the same loan conditions, your monthly payment would drop to around ¥109,000, meaning you would need an annual income of around ¥5.23 million.
3. Budget-Conscious Homeownership: Custom-Built Homes on a Lower Budget
While the average home prices listed above might seem out of reach for some, it’s worth noting that there are more affordable options, particularly if you are interested in building a home. In recent years, low-cost custom-built homes have gained popularity in Japan, with some costing as little as ¥10 million to ¥20 million.
A. Custom-Built Homes in the ¥10 Million Range
Homes in the ¥10 million range often feature simple designs with basic materials. These homes are usually rectangular or square in shape and have a boxy two-story structure to maximize space efficiently. Features like simple gable roofs or lean-to roofs are common. While the interiors are minimalist, they offer flexibility in terms of design, allowing homeowners to personalize the space through furniture, curtains, and other décor choices. Additionally, homes with simple designs are quicker to build, reducing labor costs.
B. Custom-Built Homes in the ¥20 Million Range
At the ¥20 million price point, there is more flexibility in terms of design and materials. You can include more desirable features such as a larger kitchen, high-quality flooring, and energy-efficient windows. These homes often strike a balance between affordability and customization, providing more options without exceeding your budget. However, homeowners need to avoid over-customizing their homes, as additional features can quickly push the cost above budget.
4. Post-Purchase Costs: Maintaining Your Home
Once you purchase a home, the expenses don’t stop. Homeowners in Japan are responsible for paying several taxes and upkeep costs, which can amount to around ¥400,000 annually, depending on the size and location of the property.
A. Property Taxes
Fixed Asset Tax: This is an annual tax based on the value of the land and the home. The tax rate is typically 1.4% of the property’s assessed value, but this can vary by municipality. For example, a property with an assessed value of ¥25 million would incur an annual tax of ¥350,000.
Urban Planning Tax: In areas designated as urbanized, homeowners must also pay an urban planning tax, which is 0.3% of the property’s assessed value.
B. Home Maintenance and Repairs
Over time, any home will require maintenance. Common repairs include exterior wall repainting, roof repairs, and plumbing fixes. These costs can range between ¥600,000 and ¥1 million over a home’s lifetime, depending on the extent of the work required. It’s recommended that homeowners set aside a portion of their income each year to cover these potential expenses, particularly as the home ages.
C. Fire and Earthquake Insurance
Japan is prone to natural disasters, especially earthquakes and typhoons. Therefore, most homeowners opt for fire and earthquake insurance. Fire insurance typically costs between ¥150,000 and ¥200,000 for a five-year policy, while earthquake insurance is often an additional cost that must be bundled with fire insurance.
5. Making Homeownership Affordable: Reverse Planning
For those concerned that the average home price may be out of their budget, there’s a strategy called reverse planning, which allows you to purchase a home based on your current financial situation rather than aiming for a standard property price. By determining your maximum affordable mortgage payment and working backwards, you can find a home that fits your budget.
For instance, if your annual income is ¥4.5 million, a 35-year mortgage at 1.5% fixed interest would allow you to afford a home with monthly payments of around ¥93,750. This puts your maximum affordable home price at around ¥30 million. While this is below the national average, you can still find affordable homes in suburban or rural areas or opt for a low-cost custom-built home.
A. Smart Use of Budget Homes
Recent trends in low-cost homebuilding have made it easier to build affordable homes without sacrificing quality. These homes focus on efficient use of space, simple designs, and cost-effective materials. If you’re able to purchase land in a less expensive area, you could build a custom home for under ¥20 million, which could bring total costs (including land) closer to ¥30 million.
6. Conclusion: Plan Based on Your Financial Reality
Owning a home in Japan can be a rewarding investment, but it requires careful planning and an understanding of the associated costs. The average price of homes varies significantly by region, with metropolitan areas like Tokyo and Osaka being more expensive than other parts of the country. However, by considering your budget, making use of low-cost custom-built homes, and factoring in both purchase and maintenance costs, it’s possible to find a home that suits your financial situation.
The key takeaway is to plan based on your current financial situation rather than idealizing a home beyond your means. By considering future maintenance, taxes, and insurance, you can avoid financial strain and enjoy the benefits of homeownership in Japan without overextending yourself financially.
If you’re seriously considering purchasing a home in Japan, we recommend consulting with financial advisors and real estate professionals to help you assess your options based on your income, savings, and long-term goals.
