First, a little bit of background into the current real estate market in Japan.
Japan has an over-supply of apartments because of the rapid construction of new apartments, the declining population leaving vacant rooms… and yet moreconstruction of apartments. The vacancy rates for apartments in Tokyo is 30%! Over 5 million properties are up for rent as of last year. This means there are lots of apartments and lots of choices, if you know where to look.
The real estate market is also affected by the current monetary policy in Japan. In order to stimulate the economy through lending of bank loans (so people can buy more stuff/borrow more money and companies can build more stuff), Japan’s central bank charges banks a fee to keep their money, resulting in negative interest rates. This means that banks are losing money by not lending. While it’s easier to get a home loan, this actually causes an inflation in prices and not surprisingly we have talks of a housing bubble.
Now, why does all of this matter to you?
Well, we know that there is an abundance of properties and that real estate agencies are basically dying (losing money) to either sell or rent their properties. This gives you, the buyer/renter, a big advantage.
But as a foreigner coming into Japan, particularly without the language skills, it’s easy to get duped.
One of the biggest costs you will have is the upfront cost for moving into an apartment. Even if you find something reasonable (20–35 square meters) near central Tokyo (shinjuku, shibuya) for, let’s say, 80,000 yen per month, you’ll have to usually pay the following (at minimum).
- Key Money: 80,000 yen
- One month deposit: 80,000 yen
- Agent’s commission: 80,000 yen
- Guarantor Fee: 10,000 to 80,000 yen
- Lock exchange fee: 10,000 yen
- Maintenance and insurance fees: 10,000 yen
- Total: 260,000-330,000 yen, up front in cash
There is rarely a way to completely avoid all of the fees — things like insurance are pretty important and you can’t just have them waived (nor would you want to!). However, there is a trend among certain real estate agencies moving away from charging key money and 1 month deposits.
You can save money or have most of the big fees waived (key money and deposit), essentially bringing you down to 50,000 yen or so in up front costs. That’s significant. It could be the difference between living out in the boonies for a year vs. in a nicer apartment near the city.
How do we find these properties? All we have to do is ask. Most people assume they have to pay whats on the paper, but with some basic negotiation, we can get pretty far.
To try this out, I sent an email to 3 real estate agencies asking them about properties without the above-mentioned upfront costs. Within 24 hours two of them told me they didn’t have anything at the moment — bummer. But one of them got back to me saying they have some properties. Here’s an email exchange with that real estate agency I had.
M: Hello, I’m moving to Tokyo this September and looking for an apartment. My criteria: 1 bedroom, within a 45 minute train ride from Shinjuku station, no upfront costs, and up to 80,000 yen per month rent.
Real estate agent: We have properties that meet your criteria. No key money and deposit is possible, but there won’t be a huge amount of options. The lowest guarantor fee is 30% rent of house.
M: Sounds great!
Not bad. A 24,000 yen guarantor fee on top of maintenance/insurance/commissions fees will put me to something like 50,000-100,000 yen for upfront costs — a heck of a lot less than 300,000! Perhaps I won’t get the snazziest apartment (“not a huge amount of options”), but hey, we’re staying flexible here right?
Here’s a picture below of one of the apartments they suggested (as you can see, no reikin/shikikin 礼金、敷金).
Now when someone says “you need at least 2-3k USD to move into an apartment in Japan,” you can approach it all with a dose of healthy skepticism.
Lastly, keep in mind that good apartments will go fast and often it’s just a matter of timing. Be patient and if possible work with 2 or 3 real estate agencies to compare prices, and don’t settle for the first price they give you. Good luck!