It's too easy for foreigners to buy Japanese property

Japan Times

28-05-2025

A cottage industry has spun up in Japan in the last few years offering abandoned houses, known as akiya, to foreigners.
Many countries have stock of underused housing, though Japan is certainly one of the worst offenders. Since the post-pandemic reopening, there's been a surge of interest in akiya among those priced out of their markets at home. Buyer beware: Living in poorly insulated, socially isolated dwellings in the countryside can often be less "My Neighbor Totoro" and more torturous.
But the boom has highlighted how easy it is for those outside to buy property here. Indeed, the lack of restrictions or even disincentives borders on the absurd. And it's becoming a political issue. While abandoned houses in rural areas aren't much of a concern, in Tokyo and other major metropolitan centers where property prices are surging, some are pointing an accusatory finger at international buyers suspected of triggering the rise.
In the capital, the average cost of a new apartment has topped ¥100 million ($700,000) for two years running. In the most central areas, the price of a second-hand, 70 square meter (750 square foot) apartment has doubled since before COVID-19, according to real estate consultancy Tokyo Kantei, a pace of increase practically unheard of in a market once synonymous with flatlining prices. In 2022, I wrote about the affordability of Tokyo property. Just three years later, many are feeling priced out.
There's a raft of potential culprits. New apartments are in short supply, with many prime plots already redeveloped in advance of the Tokyo Olympics. Inflation is contributing to increasing construction costs and there's a worker shortage thanks in part to a crackdown on overtime hours. The rise of the "power couple,' dual-income households of well-paid professionals, is also a factor as more women join the workplace and, in turn, the property market.
But increasingly, the spotlight is falling on foreign buyers, particularly wealthy Chinese, seeking a safe place for their capital and drawn by Japan's political stability and social safety net. Lawmakers and commentators have been raising the lack of restrictions on property in parliament in recent weeks, as well as in the media. Former international soccer-star-turned-investor Keisuke Honda summed up what many think when he recently tweeted that he thought foreigners should not be allowed to buy land here.
One thing that clouds the conversation is the lack of reliable data on transactions. Japan does not keep records of the nationality of buyers. One recent survey of developers by Mitsubishi UFJ Trust & Banking suggests that 20% to 40% of new apartments in central Tokyo were being purchased by foreigners. Authorities are now, belatedly, beginning their first-ever survey to establish the facts, NHK recently reported.
Amazingly, it was only this decade that Japan first began making it harder for foreigners to buy properties even in sensitive areas next to military bases or nuclear plants. Beyond that, it's open season: Buyers don't even have to be resident in the country, there are no additional taxes or stamp duties for foreign purchasers, nor are there extra levies for second or holiday homes.
Japan is an outlier in the region. Singapore doubled its stamp duty on foreign buyers to 60% in 2023 as part of a series of disincentives, while Hong Kong only recently removed a similar curb in an effort to breathe life into the property market. Elsewhere, Australia announced a two-year outright ban on foreigners buying some homes, a step Canada last year extended.
To be clear, Japan is nowhere near needing to take such radical steps. Indeed, it's ironic that this conversation is happening at all, given the frequent complaints about stagnant property prices. But with the secret now out about Tokyo's international attractiveness as a place to live, it's a good time for lawmakers to get ahead of the conversation — before it fuels further public discontent.
In an increasingly globalized and unequal world, residents — whether Japanese or foreign — should surely be given priority above speculative buyers looking for a rarely used second home. If nothing else, a government that needs to boost its coffers should be maximizing its tax revenues. Given the shortage of supply, it should also discourage owners from holding properties that are rarely occupied, at least in Tokyo's central areas. And it's not unreasonable for Japanese to be upset about the ease with which Chinese investors can buy in Japan, when the reverse transaction isn't even possible.
Japan's remarkable stability during its economic lean years was in large part due to the availability of basic services such as housing, something many Western economies have failed at, fueling popular discontent. As Tokyo re-emerges, it should take care not to repeat others' mistakes.
Gearoid Reidy is a Bloomberg Opinion columnist covering Japan and the Koreas.