Having started my real estate career in New York State before moving back to Tokyo, I have a fairly unique insight into both real estate markets.
The largest difference is that the Japanese tax code is written where the structure will depreciate to zero after a certain time frame depending on the type of structure.
For example, wood frame structures depreciate to zero from brand new in 22 years and steel reinforced concrete in 47 years.
If well maintained, the actual useful life of these types of properties can be much longer but when evaluating property, many realtors will calculate the land value plus the remaining value left in the structure according to its age.
Regardless of what renovation has been done to the property, the evaluation of the structure is usually treated the same way which is very different from the States where if you upgrade your property you can usually see some increase in value. With the sole exception of ultra luxury properties, this is not so in Japan.
So when we talk about prices increasing in central Tokyo, what that means is the land the property sits on is appreciating faster than the structure is depreciating.
Another difference is the lack of sales history in Japan. Often American clients ask for transaction records and are surprised, and sometimes suspicious, when they learn that Japan doesn’t require agents to publicly record sales history.
Actually, this isn’t only Japan but many European countries don’t record sales history too making transaction records a uniquely American practice.
In Japan’s case, the best way we can gauge whether a property is priced high or low is in relation to other advertised prices of similar properties over time. That said, these are listed prices and not sales prices but with nothing else available this will have to do.
Another difference are home inspections; they are a relatively new practice in the sales process in Japan. From April 1st, 2018, home inspector licensing requirements were increased in an effort to promote the adoption by buyers and sellers in order to better the perception of second hand property sales as most buyers prefer new or relatively young properties.
That said, it isn’t a legal requirement to have one performed and whether or not to do so remains a negotiation point between buyers and sellers, especially who pays for it.
One other big difference is that Japanese transactions do not involve a lawyer, other than a judicial scrivener who only is present at the settlement in order to change the title deed once the transaction has been completed.
In Japan, all sales documentation is prepared by real estate agents themselves. The brokerage license test is held once a year and focuses not only on brokerage but also construction and zoning laws and related laws in the civil code pertaining to real estate.
In essence, a real estate agent in Japan is almost like a type of lawyer given how much law they need to understand when brokering property deals. I have passed both the New York State brokerage exam and the Japanese one and I can personally attest the Japanese one was much more difficult to obtain.
Finally, the closing (or settlement as is often translated in Japan) is attended by all parties pertaining to the trade; buyer, seller, both agents representing each, a bank loan officer if financing is involved and a judicial scrivener.
However the pandemic has brought Japanese settlement practices forward into the 21st century and more and more deals are happening with virtual attendance and even via text messaging. How long this settlement attendance will remain a practice will depend on Japan consumer preferences.
For the time being, as an American coming from a land where Docusign and other, more convenient digital practices reign supreme, when purchasing in Japan expect to be present at the settlement and be pleasantly surprised if it turns out your Japanese seller is fine with digitally transacting.