How to Know the Value of Your Property in Japan

■ Introduction

If you are a foreign investor who owns real estate in Japan and you are thinking of selling your property, one of your biggest concerns is probably how much you can sell it for.

The selling price can determine the success or failure of your exit strategy for your property investment, so it is a very important piece of information.

It is therefore important to know how you can find out the value of your property in Japan, especially if you are residing overseas.

In this article, we explain how you can find out the value of your property, as well as some terminology and important points regarding real estate selling prices.

wagaya Japan has plenty of experience in selling Japanese properties owned for foreign investors residing overseas. Feel free to consult with us about selling your property in Japan.

■ Published Price and Actual Price

One important thing to understand when selling real estate in Japan is the difference between the “published price” and the “market price”.

The published price is the price index for land published every year by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). The price does not include any buildings. This published price is recorded in the real estate register of a property, and is mainly used to calculate taxes such as the Fixed Asset Tax.

On the other hand, the actual price is the transaction price at which real estate is sold or bought in the market. When a real estate transaction occurs between a buyer and a seller, the price paid is the actual price, and is sometimes called the “market price”. This price includes buildings and land.

If the real estate you own in Japan is only land, then you can use the published price as a reference. But a property for investment normally means that there is a building to reside in, so you should put more emphasis on the actual price.

However, as a building gets older, its value gradually depreciates, eventually becoming zero after a certain number of years. In this case, the published price can be used as a reference for the selling price even if there are buildings on the land being sold.

As a rough estimate, the actual price of a property is usually 1.1 to 1.5 times as much as the published price.

■ Factors that Determine the Actual Price

If your property is a building that includes land, then the published price can serve as a reference for its selling price. But if your property is a single unit in a condominium, then the published price may not be very useful.

If your property is a freestanding house with land, but the house is so old that its value is likely near zero, the property can still sell at a good price through renovations and other conditions such as the house layout and the view.

The actual price can also vary depending on the current supply and demand of the real estate market. One of the things that greatly affects real estate supply and demand is the lending stance of banks and financial institutions.

The high price of real estate means that most buyers have to take out a loan from a bank in order to make a purchase. If banks are cautious about lending for real estate loans, then buyers become more scarce, which means sellers find it more difficult to sell, generally leading to lower real estate prices. Conversely, if banks are more positive about lending, then buying demand increases, leading to higher real estate prices.

Besides these trends with banks, the actual price of real estate can also be affected by changes in the economic situation of the specific area or region where it is located.

For example, if a new commercial complex is built near the area, or a major corporation establishes a base or factory in the area, the expected population influx can cause real estate prices to rise.

On the other hand, if for example a major university closes down in the area, then the tenancy demand from students can drop significantly, which can cause real estate prices to fall.

As you can see, the actual price of a property in Japan is affected by many factors that are intricately connected, and can vary greatly depending on the timing of the sale. It is thus very difficult to make a very accurate appraisal of the selling price you can get for your property.

■ Choosing a Good Real Estate Agency

Since the actual price of a property can be difficult to determine because of various factors, it is important to find an experienced and reliable real estate agency who can provide a good property value assessment. This is especially important if you are a foreign investor residing overseas.

In Japan, it is very rare for two individuals to conduct a real estate transaction directly. Almost all transactions are conducted through a real estate agency.

As such, even if a real estate agency is able to provide an accurate value assessment for your property, it will probably be difficult to make a sale if that real estate agency has little experience or motivation in selling your property.

In other words, the expertise of your real estate agency is one of the biggest factors that can determine the price at which you can sell your property.

wagaya Japan has plenty of experience in selling Japanese properties owned for foreign investors residing overseas. Feel free to consult with us about selling your property in Japan.

■ Summary

If you live in a country where real estate transactions are commonly conducted directly between individuals, you may find Japan’s real estate market to be peculiar. But you should keep in mind that the sales competence of the real estate agency is one of the keys to getting a good sales price for your property in Japan.

It is thus important to find a good real estate agency not only to determine the accurate value of your property, but also to provide you with the best deal when selling your property.

If you are looking to sell your property in Japan, you should start by looking for a real estate agency who can be your reliable partner.

wagaya Japan has plenty of experience in selling Japanese properties owned for foreign investors residing overseas. Feel free to consult with us about selling your property in Japan.