Common Mistakes Foreign Buyers Make When Purchasing Property in Tokyo

Many foreign buyers considering purchasing real estate in Tokyo want to take proactive steps to avoid costly mistakes during the buying process.

To successfully purchase property in Tokyo without errors, it is important for foreign buyers to understand common mistakes and learn how to prevent them.

In this article, we introduce five common mistakes that foreign buyers often make when purchasing property in Tokyo, along with key tips to avoid these mistakes when buying real estate in Japan.

We will also explain the overall process of purchasing real estate in Japan as a foreign buyer, so we hope you find this guide helpful.

Five Common Mistakes Foreign Buyers Make When Purchasing Real Estate in Tokyo

The five most common mistakes that foreign buyers make when purchasing real estate in Tokyo are as follows:

1. Proceeding without understanding Japanese real estate laws
2. Purchasing property without knowing the difference between freehold ownership and leasehold rights
3. Buying property without conducting sufficient research on the area
4. Choosing a real estate agency that does not specialize in foreign buyers
5. Overlooking taxes that apply after purchasing property

Below, we explain each of these common mistakes in detail.

Proceeding Without Understanding Japanese Real Estate Laws

Japan has various laws governing real estate transactions and land use. Failing to review these regulations in advance may lead to costly mistakes.

Some of the key laws related to real estate transactions and land use in Japan include:

Real Estate Brokerage Act (Building Lots and Buildings Transaction Business Act)	A law designed to protect buyers by regulating transactions involving land and buildings.
City Planning Act	Defines development permissions and building restrictions within designated urban planning areas and quasi-urban planning areas.
National Land Use Planning Act	Establishes notification and approval requirements for land transactions in regulated, monitored, and designated areas.
Building Standards Act	Sets standards for building structure, equipment, usage, and land, including construction regulations and seismic requirements.

Purchasing property without understanding these laws may result in regret, such as being unable to buy the property you originally intended. It is therefore essential to review these regulations carefully in advance.

Purchasing Without Understanding the Difference Between Freehold and Leasehold

If you purchase property without understanding the difference between freehold ownership and leasehold rights, you may later regret having limited freedom in how the land can be used.

In Japan, land rights are generally classified into the following two types:

Freehold Ownership	The right to freely use, generate income from, and dispose of land within the limits of the law.
Leasehold Rights	The right to lease land from a third party—typically by paying a monthly fee—and construct a building on that land.

With freehold ownership, you generally have broad freedom to build on the land, rent out the property, or generate income. In contrast, leasehold properties require the landowner’s consent for actions such as renovations, resale, or leasing, which can impose significant restrictions.

Purchasing Without Conducting Sufficient Area Research

Failing to thoroughly research the area where a property is located may lead to mistakes such as limited future asset value growth.

For example, if a bus route—the only means of transportation—gets discontinued, accessibility may decline. Similarly, purchasing property in an area where vacant houses are increasing may result in a future drop in property value. Overlooking such factors can ultimately lead to an unsuccessful real estate purchase.

Choosing a Real Estate Agency That Does Not Specialize in Foreign Buyers

Some real estate purchasing mistakes stem from selecting an unsuitable real estate agency.

If foreign buyers choose a real estate agency that does not specialize in assisting international clients, they may receive insufficient support with document preparation, international remittances, and other essential procedures.

In addition, agencies without experience working with foreign buyers may offer limited access to property information in English and a smaller selection of high-end or luxury properties.

Overlooking Taxes Payable After Purchasing Property

In Japan, various taxes apply after purchasing real estate, so it is important not to overlook them.

These include Real Estate Acquisition Tax, which is imposed when acquiring property; Fixed Asset Tax, which is charged annually to property owners; and Income Tax, which may apply if rental income is generated. To avoid issues, it is essential to clearly understand where tax notices will be sent and to plan for tax payments in advance.

Key Points to Help Foreign Buyers Avoid Mistakes When Purchasing Real Estate in Japan

To avoid mistakes when purchasing real estate in Japan—including Tokyo—foreign buyers should keep the following three key points in mind:

1. Choose a real estate agency that can support foreign buyers
2. Research areas where property values are less likely to decline
3. Appoint a representative to ensure procedures proceed smoothly

Below, we explain each of these points in detail.

Choose a Real Estate Agency That Can Support Foreign Buyers

To avoid mistakes when purchasing real estate in Japan, it is essential to choose a real estate agency that offers comprehensive support for foreign buyers.

Agencies experienced in assisting international clients can provide guidance throughout the purchasing process and offer property information in English, helping buyers proceed with confidence.

In addition, such agencies often handle a large number of luxury properties in Tokyo, making it easier to find a property that meets your specific needs and preferences.

APARTMENTS TOKYO by Asian Property specializes in luxury real estate in Tokyo. Our English-speaking staff provide tailored property introductions and detailed information to help clients find high-quality properties that match their requirements.

Research Areas Where Property Values Are Less Likely to Decline

Before purchasing real estate, it is important to research which areas are likely to maintain their asset value over time.

For example, areas in Tokyo with stable property values often share the following characteristics:

• Convenient transportation access, such as locations within a 10-minute walk from a train station
• Easy access to essential facilities, including supermarkets, convenience stores, schools, and hospitals
• Lower risk from natural disasters such as earthquakes and typhoons

Because traffic congestion is common in Tokyo, proximity to train stations that allow efficient travel throughout the city is a major advantage in terms of asset value.

In addition, areas with a good range of daily-life amenities, as well as locations on higher ground or with strong soil conditions that are less susceptible to earthquakes or typhoons, tend to retain their property value more effectively.

Why Tokyo’s Luxury Real Estate is a Smart Investment for Foreign Buyers

Appoint a Representative to Ensure a Smooth Process

Another effective way to prevent mistakes in real estate procedures is to appoint a representative.

For example, by designating a tax agent (tax payment administrator) to handle the receipt of tax notices and the payment of taxes—such as Real Estate Acquisition Tax and Fixed Asset Tax—foreign buyers can avoid issues related to tax obligations after purchasing property.

The Process of Buying Real Estate in Japan as a Foreigner

When foreign buyers purchase real estate in Japan—including Tokyo—the process generally follows the steps below:

1. Find a real estate agency that specializes in foreign buyers
2. Research the area
3. View properties
4. Understand the purchase costs and applicable taxes
5. Confirm the payment method
6. Receive an explanation of important matters
7. Sign the sales and purchase agreement
8. Register the transfer of ownership
9. Submit notification to the Minister of Finance

Before signing the sales contract, you will receive an Explanation of Important Matters from the real estate agency. This step is particularly important to ensure a smooth and mistake-free property purchase.

During this explanation, you will be provided with detailed information about the property, including ownership rights, legal restrictions, flood risk information, and contract cancellation conditions. Be sure to review all details carefully to avoid overlooking any important points.

After signing the contract, you will also need to complete procedures such as registering the transfer of ownership and submitting a notification to the Minister of Finance. For more details, please refer to the article below.

The Legal Process of Buying Property in Japan as a Foreigner

Summary:Common Mistakes Foreign Buyers Make When Purchasing Property in Tokyo

In this article, we have introduced five common mistakes that foreign buyers often make when purchasing property in Tokyo, along with key points to help prevent these mistakes when buying real estate in Japan.

If you are looking to find high-quality properties in Tokyo through a real estate agency that specializes in foreign buyers, we invite you to consult APARTMENTS TOKYO by Asian Property.APARTMENTS TOKYO offers a wide selection of luxury properties across Tokyo and provides comprehensive support in English, including guidance on the purchasing process and detailed property information. Please feel free to contact us for assistance with your property search.