Akiya: The Truth Of Free Houses In Japan

The concept of “free houses in Japan” has been viral for months on CNBC, CNN as well as endless national media sites. Some of you may be familiar with the headline “Thousands of houses are now ready for sale at the cost of 0 JPY”. Business investors have seen it as a one-way ticket toward home ownership in Japan. Are those houses really a golden chance or just another scam? Let’s find out the answer in this Location guide!

Free houses in Japan and what to consider

What are free houses in Japan?

Free houses, also referred to as akiya or 空き家 in Japanese, are houses that have become abandoned or unoccupied. They could range from cheap McMansions to desolate rural farmhouses to Japanese billionaire Genshiro Kawamoto’s magnificent ruin of an estate. Those empty properties have no one claim to own and which real estate agents have basically given up on trying to sell.

In fact, akiya are mostly located far away from major cities and possibly close to ski resorts, onsens and other outdoor wonders. One good thing about akiya is that they are often quite large in size compared to Japanese standards. An examination on the floor plans of old houses in Oita Prefecture shows that most rooms conform to the 4 to 6 tatami mat standard. There is usually one larger room of 8 to 10 mats. Houses’ conditions, however, are low in general, with rudimentary kitchens and toilets that are obsolete enough to squat.

The emergence of akiya

The phenomenon began to emerge in 2013, in which one in seven houses were left empty over the country. As published in the Japan’s Housing and Land survey, the figure then massively increased, making over 8 million out of 62.4 million homes were disused in the next 5 years. Even in Tokyo, one in every ten homes was abandoned. That’s a lot, but the situation is going to get worse. According to the Ministry of Internal Affairs and Communications, the record of akiya has recently risen to exceed 10M. Soon in the less distant future, there will be one-third of all homes in Japan becoming vacant. If the calculations are right, around 900 petite settlements will no longer exist by 2040.

Background of “Vacant Houses for Sale

First, let’s take a look at the background behind the increase in the number of people who want to give away their vacant houses for free.

According to the Ministry of Internal Affairs and Communications, the total number of vacant houses in 2018 amounted to approximately 8,489,000, and the vacancy rate, using the total number of houses as the denominator, is 13.6%. This indicates that there are quite a large number of vacant houses in Japan.

Japan will become a super-aging society in 2025, when the baby boom generation turns 75 years old. The number of vacant houses is increasing rapidly due to Japan’s unique value system that places importance on new construction and the declining population due to the declining birthrate.

And the reasons for the tax burden are driving this trend even further. The reason is that demolishing a house that no one lives in and clearing the land raises property taxes. Therefore, more and more owners are leaving their inherited vacant houses unattended.

How to get a free house in Japan?

By now, rural Japanese towns are so desperate for younger residents that they are giving houses away for free. It is not just a matter of declining need and breakdown structures. The empty residents lessen the price of the adjacent estate and pose a threat to the presence of whole villages. The lack of infrastructure makes it hard for communities to thrive. As a result, the government decides to run the akiya scheme (also called the Special Measures Act of Promotion on Vacant Houses) as its last-ditch attempt to revitalize those threatened areas.

The akiya scheme allows people to buy old houses in Japan for as little as a few million yen or even free in some circumstances. Large houses with an extensive amount of land are sold at around JPY 2 million ∼ 15542.42 USD, with the potential to negotiate a lower price.

Flow of acquiring a free vacant house

First, let’s touch on the general process for using a typical vacant house bank.

1. Search for a vacant house of your choice from a vacant house bank.
2. Inquire by e-mail or phone about using the bank.
3. Apply to use the bank.
4. Contact and negotiate with the owner of the vacant house through the management office of the vacant house bank.
5. Sign a transfer contract and hand over the property.

Depending on the municipality, you may have to sign a contract with an intermediary before signing a transfer contract with the owner. Check with the bank of the municipality you wish to use for specific procedures.

Besides, it’s worth knowing that not all akiya are for sale. Some are for rent with extremely low cost, sometimes under ¥10,000/month ∼ 77.71 USD/month. Some can be transferred to the residents after a certain period of time renting, maybe 20 years or more. Though, these prices are already exceptionally lower than buying a new estate in Japan.

However, there is a fact that not everyone is able to register. In most cities, free houses are offered with strict conditions to fulfill. For example, applicants must be under 43 years old and have children under middle/junior high school age. Clearly, young (Japanese) families who can commit to living in the town for a long time are prefered. In Okutama and Tokyo, families with a lot of children are welcome with the rent being reduced by ¥5,000 ∼ 38.86 USD per child.

Why are there so many abandoned houses?

Aging population

A vast majority of homes, spreading throughout Japan, especially in the countryside of Kagoshima, Kochi, Tokushima and Wakayama, are now claimed not in use for various reasons. The most apparent may be rooted from the fact that the country’s birth rate is falling and society is rapidly aging. People are getting old so most of them have been moving to metropolises. Therefore, they can no longer take care of the property that they inherited in the 40s, 50s. It is understandable that there is an overwhelming preference of Japanese residents for newly built houses over older buildings.

House conditions

Otherwise, home condition, location and the property tax could be named as other triggers which aren’t discussed so often. A lot of structures were built in boom times which means that they are shoddy, uninhabitable due to the loose of construction standards, and not supposed to last long. Many are  old, unwanted and have sometimes been left empty for an extended period of time. These influences generally lower the estate’s value and discourage new investors from moving in the house.

Location

Beyond the property lines more problems await, especially in rural locales where different forms of service and entertainment such as shopping malls, hospitals, education centers, recreation centers and restaurants are dying. Let’s say even if the house was in good shape, young generations often don’t want to repopulate in a neighborhood that may not exist shortly after moving in or have no sustainable development. They may have to spend hours driving to their workplace in the nearest city, work distantly or run their own company in the new area to manage their new life.

Taxes

Money is another force contributing to the upsurge of akiya. In fact, property taxes in Japan are not especially high compared to New York or Texas, for example. Still, many would prefer to leave because they do not want to pay fees applying for an asset that they do not use. Moreover, government administration even enacted an edict in 2015 prompting municipal authorities to levy a fine on those who don’t take down or recondition their holdings. Therefore, the key driver of the akiya wave is that the actual owner does not want to admit ownership because of the tax liability.

The factor mentioned above has subsequently led to another issue. Consider the fact that property records are not frequently updated, the last known owner is dead or gone, and nobody steps forward to claim the place. It’s complicated to check the title of holdings. If you cannot identify the previous owner, changing ownership to your name will become problematic.

Why aren’t they really “free”?

Realistically speaking, these homes aren’t 100% free. Considering various types of tax and the additional renovating cost needed to make a ¥10,000/month house livable. Those price tags, together with strict terms, would make any potential home buyers rethink before affixing their signature.

These houses are often old and vulnerable after being exposed to fire hazards, termites, hygiene problems and natural disasters like earthquakes. Regulated by the age and erection method of the property, repairs may either take up to millions of yen or sometimes equate to the cost of purchasing a brand-new one. A good news is that local authorities may be willing to provide financial aid (up to ¥200,000 ∼ 1554.24 USD) if renewing the asset profits the community.

When buying any existing house and land in Japan, buyers also need to plan a budget for different types of fees. They are administrative and management costs, registration and license tax, agent commission and other taxes such as acquisition and property tax. Obviously, those fees vary based on each property, but expect that they may cost up to ¥400,000 ∼ 3108.48 USD.

Expenses and Taxes for Acquiring a Free Vacant Property

Even if the acquisition itself is free, there are taxes and fees that must be paid as long as you own the property. Some of these are required by the municipality, while others are required uniformly throughout the country.

First, there are five main taxes that are imposed when acquiring real estate

• Registration and license tax
• Gift tax
• Real estate acquisition tax

1. The registration and license tax

It is imposed when transferring ownership registration to the buyer. It is basically paid in the form of the purchase of revenue stamps.

2. Gift tax

It is a tax imposed on the donee (the person who receives the property, in this case the buyer) in the case of a gratuitous transfer between individuals, even if the donee is a stranger. The donor is obligated to pay the tax calculated based on the inheritance tax assessed value, not the market value.

Gift tax is a very high tax. In order to avoid incurring gift tax, it is necessary to buy a property that has incurred a certain amount of money, such as 100,000 yen ∼ 777.12 USD, for example. However, since a property with a memorandum price (meaning an insignificant price) such as 1 yen may be subject to gift tax based on individual judgment, it is recommended to buy a property with a certain amount of money even if it is inexpensive.

3. Real estate acquisition tax

It is a local tax. It is calculated based on the value of the property acquired, and the amount of deduction for housing reduction varies depending on the municipality. You can find out how the tax is calculated by contacting the municipality that has jurisdiction over the vacant house to be transferred.

In addition, property tax and city planning tax will be incurred every year as long as you continue to own the property. All other taxes are paid only once.

Procedures when dealing with real estate often require specialized knowledge, and it is difficult, though not impossible, for a layperson to proceed alone.

Therefore, it is common to ask a judicial scrivener or broker to prepare documents and register on your behalf. In such cases, the following costs are generally incurred.

Broker’s commission: If the transaction amount exceeds 4 million yen, “transaction amount x 3% + 60,000 yen” + 10% consumption tax; if the transaction amount exceeds 2 million yen and is less than 4 million yen, “transaction amount x 4% + 20,000 yen” + 10% consumption tax; if the transaction amount is less than 2 million yen, “transaction amount x 5%” + 10% consumption tax

Sample costs breakdown for taxes and fees

To be specific, there are five distinctive taxes to be paid. From most expensive to least expensive, they are:

• Registration tax (登録免許税) – 2% of estimated value
• Property acquisition tax (不動産取得税) – 3% of purchase price
• Fixed asset tax (固定資産税) – 1.4% of purchase price
• City planning tax (都市計画税) – 0.3% of purchase price
• Stamp duty (印紙税) – 0 to 20,000 yen depending on purchase price

If you were to purchase an akiya for JPY 2,000,000 but with a government estimated book value of JPY 4,000,000, the additional tax costs would be:

• Registration tax: JPY 80,000
• Property acquisition tax: JPY 60,000
• Fixed asset tax: JPY 28,000
• City planning tax: JPY 6,000
• Stamp duty: 0 (stamp duty is zero up to 5 million yen)
• Lawyers fees: JPY 100,000

Total: JPY 274,000

Please note that the payment for “judicial scrivener” (司法書士) who will write the contract and handle any legal issues is required to be made by the buyer.

Rented out at an extremely low rate with the option to become the landlord after a certain period of time is another route. For the current Shichikashuku scheme, a one month rental charge for  a detached house is JPY 35,000. Provide that you continuously live there for 20 years, the home will be in your name. This would equal paying a JPY 8.4 million (approx. USD 74,000) mortgage to make the home yours, which is still a very good price.

Okutama applies the similar rule, in which renters pay for JPY 50,000 per month and the ownership of the property will be handed over after 20 years.

Cautions about Free Vacant Houses

Depending on its condition, it may need to be remodeled

Since the house is vacant, it may need to be remodeled depending on its dilapidated condition. If remodeling is necessary after acquisition, a financial plan must be made that includes the cost of remodeling and rent for temporary housing during the remodeling process.

Some municipalities have introduced systems that provide subsidies for a portion of the renovation costs of a vacant house or for moving expenses. It would be wise to look for a property in a municipality that offers such generous support.

Termites and cockroaches may breed in vacant houses, and rats and cats may live in them. If you find a vacant house that looks promising in the bunks, you can contact the owner of the vacant house to check its condition.

It would also be most prudent to visit the site and see for yourself. Even if the house is damaged by pests or vermin, it may be habitable with a little work and prevention.

SEE MORE: 

• What Are Tokyo House Prices? Are They Really Expensive?
• Homestay In Japan: Ultimate Guide For Foreigners

Can a foreigner buy a “free house”?

First of all, don’t take akiya as your fast track to settling in Japan. Owning an asset, abandoned or otherwise, has nothing to do with residence status. And back to the very first question, yes, foreigners are able to buy old houses in Japan at a super low cost. However, there are restrictions to keep in mind.

For example, one clause mentioned specially in some contracts is that the buyer must be willing to live in the house permanently. It is merely impossible because it goes against restrictions on your current visa. Government also requires dwellers not to leave the town despite the limited commercial capacity as it is a term in the resettlement program.

For houses that go with farmland, purchasers are expected to engage in full time farming, not as a hobby. They also need to gain approval from the local agricultural committee. Registration for temporary preservation title rights may put off agribusiness on your land. But when that expires, you’ll be expected to eventually utilize the farmland.

Check out akiya banks

Unoccupied houses are available on “akiya banks”, offices specialized websites looking for new owners for akiya.  This is a portal site that collects information provided by vacant house owners who wish to rent, sell, or transfer their vacant houses for free, and introduces them to people who are considering using them. The main purpose of this project is to revitalize the community by expanding interactions among residents across regions and promoting settlement through the effective use of vacant houses.

Not all of the properties are up for grabs. But amongst those that are, you may find the one that really fits your budget and can be turned into something beautiful with renovation efforts.

* Note: Not all of them are free, but some of them are willing to be transferred free of charge, so look for them in the bank of the municipality you wish to use.

The listings are in Japanese. Please note that for the wisest decision, go to the fieldtrip to get the actual condition of the property before moving to the next stage.

• Homes
• AtHome
• Suumo

There are also websites and blogs promoting rural life and akiya homes in all prefectures:

• Inakanet
• Inaka Kurashi
• Furusato-net
• Inaka No Seikatsu
• Mina 50

Another reliable database that was created in 2015 by a real estate consultant and architect named Tetsuya Fujiki is Leichiba. The site allows landlords to put their properties up for bids and consult with potential buyers.

There may be subsidies available from the local communities for renovating akiya. So don’t forget to ask about it before you sign the contract.

Conclusion

Buying free houses in Japan requires a long-term commitment of time, sweat and money. And because the value of the property rarely goes up, consider carefully before heading to any decision.