Apartment Buying Guide

The following is a detailed guide to the things to look out for when buying an apartment in Japan.

Location:

In central Tokyo (eg. Hiroo, Azabu, Roppongi, and Shinjuku) where land prices are very high, you will find a larger supply of apartments. As you head further outside of the central area you will find more houses and less apartments (eg. Setagaya-ku, Ota-ku etc). Commercial areas such as Shinjuku and Tokyo Station have mostly office buildings and few apartments. In fact, the Marunouchi area in front of Tokyo Station does not have any apartment buildings.

The bayside areas of Shibaura, Konan, Odaiba, Tsukishima, Kachidoki and Toyosu have a very large supply of relatively new apartments and prices tend to be lower per square meter than areas closer to Roppongi and Shibuya. These bayside areas are also built on reclaimed land, some of it polluted. The recent 2011 Tohoku Earthquake caused severe liquefaction to reclaimed land on the bayside area in Urayasu, Chiba. This caused a temporary, but steep drop in demand for apartments built on man-made islands but demand recovered following the 2020 Summer Olympic announcement.

Pricing:

Many agents will talk about the price per square meter or per Tsubo (one Tsubo = ~3.3 sqm). This is often used as a yardstick when comparing apartments.

To get an idea about pricing, talk to an experienced agent.

Apartments built to the older earthquake codes (kyu-taishin) may be significantly cheaper than newer apartments, but, unless they are in highly desirable locations, they may prove to be more difficult to rent out or re-sell in the future.

Land Ownership:

The majority of apartments in Japan are freehold. This means the apartment comes with ownership of a portion of the land under the building. There are also leasehold apartments in Japan and in Tokyo, such as Park Court Jingumae, Hiroo Garden Forest and Azabudai Park House. In Japan, it is the land that holds its value, not the apartment, so be sure to check that the land ownership rights.

A freehold apartment will have a land ownership ratio which is used to calculate the approximate size of land included. The land ownership size will depend on the total size of the block of land, the number of units and the individual apartment size.

As an apartment ages, the building’s value will depreciate for accounting reasons but the land value may stay the same or appreciate in value. For a newer apartment, the land ownership may account for 70~80% of the sales price, while the land ownership of an older apartment may make up 80~90% of the sales price.

Land ownership is typically smaller for a high-rise apartment and this is very appealing to those looking to reduce their inheritance tax burdens.

Buying a new apartment:

Apartments sold by developers will usually have a 10 year warranty against defects, whereas older buildings will only have a 3 month to 2 year warranty depending on whether the seller is a private individual or corporation.

New apartments are built to the latest earthquake resistant construction methods.

Buying an older or “vintage” apartment:

The average useful life of an apartment building is around 60 years, although there are still older buildings around. As a building ages, it becomes more costly to repair and maintain. Eventually, a choice is made by the residents to rebuild.

One thing to be aware of when looking at older apartments is whether the building exceeds the current capacity ratio (Yosekiritsu) or height limits. As zoning laws change over time, the building may have been built to previous zoning laws, while current zoning laws will only permit a smaller building to be constructed. This would mean that you could end up with a smaller apartment and may have to contribute more to the re-construction costs. In these cases, it can be difficult to get owners to agree to redevelopment. One building near Harajuku Station is currently undergoing this problem as the building exceeds current height limits.

Sometimes developers can obtain approval to construct a larger building by incorporating public space such as a park into the new design.

There are also buildings that are below the current capacity ratios. This means that a much larger building can replace the current one. In this situation, unit owners are less likely to bear the burden of construction costs as a developer may undertake the project in return for extra units that they can then sell. This is very rare, however.

A drawback to an older apartment is that banks generally offer a smaller loans as their valuations tend to be lower.

Apartment Size:

Japanese apartments are typically smaller than their western counterparts. A 2 or 3 bedroom apartment in Japan may be between 50 ~ 70 sqm. Larger apartments over 100 sqm are fewer in number as Japanese developers focus on smaller types which are easier to sell. Apartments over 250 sqm (2690 sqft) are a rarity in recently built condominiums, but are more likely to be found in rental buildings aimed at the expatriate market, as well as in older buildings from the 1970s ~ 1980s.

The advertised size of an apartment refers to the interior area of the unit and does not include balcony space, elevator hallways or car parks. It is calculated using the kabe-shin method which is measured from the center line or middle of the apartment’s outer walls.

There is another method called uchi-nori menseki which is the measurement from the inside wall. This is only used for official registration purposes.

Apartment Direction:

In Japan, south-facing rooms get the most sunlight throughout the day and are usually priced at a premium. North-facing apartments tend to get the least amount of sunlight and can be dark.

According to a survey by Attractors Lab, North-facing units tend to increase in value after purchasing from the developer, while South-facing units tend to depreciate. View more here.

Monthly fees to be paid when owning an apartment:

When calculating your monthly mortgage expenses, remember to add the building’s management and other building fees to make sure you are still within your budget.

Management Fees:

These fees go to the management company who runs the building and its common areas. This is not to be confused with property management fees which are charged by a real estate agent if they find a tenant for your property.

Management fees will be higher for a building with features such as a live-in caretaker, high security, concierge service. They will also be high if the building has a small number of units as there are less units to share the costs.

Repair fund:

These fees go towards a ‘sinking fund’ which is used for scheduled and necessary repairs and maintenance to the building over its life. Some buildings may have fees that are scheduled to increase after a certain number of years, while other buildings may have a fixed fee that will not increase without agreement of unit owners. The building’s association (made up of apartment owners) can ultimately vote to change the fees.

When buying new from a developer you may also have to pay a large fee upfront when purchasing the apartment, along with the usual monthly fees. A new building is also likely to have a schedule which outlines when extra payments are due in future years.

If the repair fund fees are too low, there is a risk that there will not be enough money to pay for any large scale building repairs. Ask the real estate agent to check the current balance in the repair fund and to provide a history of the past repairs to the building.

Management and repair fund fees are calculated by the internal size of the apartment. They tend to range anywhere from 300 ~ 600 Yen/sqm per month, but may be higher in some buildings.

Carpark:

Some apartments may include usage rights to one or more carparks, in which case you will have to pay a monthly fee for the carpark whether you have a car or not. Other apartments may have carparking within the building, but not included with the unit which means you only have to pay if you need to rent one. The average carpark in central Tokyo is approximately 50,000 Yen/month but may go as high as 100,000 Yen/month. Depending on the management bylaws, you may be allowed to rent your carpark out to another resident. Renting to someone outside the building may be allowed in some buildings, but in many cases it is prohibited.

There are usually two types of car parks available: flat parking and machine parking. Flat parking is more expensive, while machine parking is cheaper as it can be a little less convenient to use.

Check the size limits of the car park as some SUV’s and even sports cars with low ground clearance may not fit in the machine parking.

Other fees:

There may be a variety of other monthly fees depending on the building. Some older buildings may have separate hot water and central heating/cooling charges, while modern apartments do not. If the apartment has a private roof terrace or garden, there may also be a fee based on the size of the outdoor space, as balconies, terraces and gardens are technically part of the building’s common area and are not part of your exclusive-possession.

Checklist before you buy:

  • History of building repairs and any planned repairs in the future.
  • Current balance in the repair fund.
  • Does the owners association have any debt or borrowing?
  • Are any other apartment owners in the building delinquent on monthly building fees?
  • Are there any plans or discussions about rebuilding?
  • Any known construction to commence nearby that may affect the view?
  • If the building was completed in the early 1980s, is it shin-taishin or kyu-taishin? (read more about earthquake building codes here).
  • The apartment’s land ownership portion.
  • Does the building or house have a building certificate (kenchiku-kakunin)? If it does not, then very few banks will lend on the property and those that do will offer far less favorable rates.
  • If you have pets, check that the management company allows pets and if your pet is within the size limits.
  • If you have a car, are there any spaces available and what are the size limits?