Buy an Apartment in Tokyo: Complete Tax and Cost Guide for Foreign Buyers 2026

The average price of a previously occupied apartment in Tokyo’s six central wards reached ¥187.3 million in March 2026, marking a 0.2% decline from February but remaining elevated by historical standards. For foreign buyers considering entry into the Tokyo market, the purchase price represents only the first layer of cost. Acquisition taxes, holding taxes, capital gains obligations, and the imminent 2027 inheritance tax reform create a complex fiscal landscape that demands precision before committing capital. This guide addresses the specific tax and regulatory framework foreign buyers face when acquiring residential property in Tokyo in 2026.

Acquisition Taxes When Buying an Apartment in Tokyo

When you purchase an apartment in Tokyo, three distinct taxes are levied at the time of acquisition, each calculated on different bases and payable to different authorities.

Stamp duty (印紙税, inshi-zei) is a consumption tax on the purchase contract itself. For contracts valued between ¥100 million and ¥500 million, the stamp duty is ¥60,000. For contracts between ¥500 million and ¥1 billion, it is ¥160,000. These reduced rates apply to contracts executed through March 31, 2027, under a special measure (租税特別措置法) administered by the National Tax Agency. The stamp is affixed to the contract document and represents a minor but non-negotiable cost. Real estate acquisition tax (不動産取得税, fudōsan shutoku-zei) is levied once by the Tokyo Metropolitan Government upon acquisition and is substantially more significant. The standard rate is 4 percent of the assessed value (固定資産税評価額, kotei shisan-zei hyōka-gaku). However, residential buildings qualify for a reduced rate of 3 percent under Article 11 of the Local Tax Law (地方税法附則). Additionally, new residential buildings receive a special deduction of ¥12 million per unit from the assessed value before the 3 percent rate is applied, provided the unit’s floor area falls between 50 square meters and 240 square meters. For a newly constructed apartment with an assessed value of ¥50 million, the acquisition tax calculation would be (¥50M − ¥12M) × 3% = ¥1.14 million. Used apartments do not qualify for the ¥12 million deduction, so the calculation is straightforward: assessed value × 3 percent. Registration and license tax (登録免許税, tōroku menkyo-zei) is charged for the transfer of ownership title (登記, touki, recorded at the Legal Affairs Bureau). The standard rate is 2.0 percent of assessed value, but residential property purchases qualify for a reduced rate of 1.5 percent under a special measure valid through March 31, 2026. If a mortgage is being registered (抵当権設定, teitō-ken setei), an additional 0.4 percent of the loan amount is charged; residential mortgages under special measures qualify for 0.1 percent. For a ¥150 million apartment with a ¥100 million mortgage, the registration tax is (¥150M × 1.5%) + (¥100M × 0.1%) = ¥2.35 million.

The combined acquisition tax burden on a ¥150 million purchase is typically ¥3.5 million to ¥4.5 million, depending on whether the property is new or used and whether a mortgage is involved. This represents 2.3 to 3 percent of the purchase price and must be budgeted separately from the down payment (手付金, tetsuke-kin, typically 10 percent of purchase price).

Holding Taxes: Fixed Asset and City Planning Tax Explained

Once you own the apartment, two annual taxes are levied by the Tokyo Metropolitan Government: fixed asset tax and city planning tax.

Fixed asset tax (固定資産税, kotei shisan-zei) is assessed at 1.4 percent of the property’s assessed value. In Tokyo’s 23 wards, this tax is collected by the Tokyo Metropolitan Government in four installments: by June 30, September 30, January 5, and March 2 of each fiscal year. The assessed value is typically 60 to 70 percent of the property’s market value and is reassessed every three years. For a ¥150 million apartment with an assessed value of ¥90 million, the annual fixed asset tax is ¥1.26 million, or approximately ¥315,000 per quarter.

A critical reduction applies to residential land. The “small-scale residential land special measure (小規模住宅用地特例)” reduces the taxable base to one-sixth of assessed value for land up to 200 square meters per residential unit. For land exceeding 200 square meters per unit (general residential land), the base is reduced to one-third. In practical terms, if the land portion of your apartment’s assessed value is ¥30 million and the apartment qualifies as small-scale residential, the land’s contribution to fixed asset tax is only ¥5 million (one-sixth), rather than the full ¥30 million.

Additionally, newly built residential buildings receive a five-year reduction on the building portion of fixed asset tax. For the first five years after completion, the tax on the building is halved. Buildings certified as long-term excellent housing (認定長期優良住宅) receive a seven-year reduction instead. This means a new condominium completed in 2026 will pay half fixed asset tax on the building portion through 2030, then full rate thereafter.

City planning tax (都市計画税, toshi keikaku-zei) is an additional 0.3 percent of assessed value in Tokyo’s 23 wards. Like fixed asset tax, it benefits from the small-scale residential land reduction: the taxable base for land under 200 square meters is reduced to one-third of assessed value; for general residential land, it is reduced to two-thirds. For the same ¥90 million assessed value apartment, city planning tax is ¥270,000 annually, or ¥67,500 per quarter.

The combined annual holding tax on a ¥150 million apartment with an assessed value of ¥90 million is approximately ¥1.53 million in the first five years (benefiting from the new-building reduction on the building portion), rising to approximately ¥1.8 million thereafter. This equates to roughly 1 to 1.2 percent of the purchase price annually and must be factored into long-term ownership cost projections.

Capital Gains Tax and the 5-Year Rule for Property Sales

The taxation of capital gains on real estate sales in Japan is governed by a critical timing rule that foreign buyers frequently misunderstand: the January 1 rule (1月1日ルール). The holding period is determined not by the actual sale date but by the ownership status as of January 1 of the year in which the sale occurs.

Properties held for more than five years as of January 1 of the sale year qualify for long-term capital gains treatment. The combined income tax and resident tax (住民税) rate is approximately 20.3 percent. Properties held five years or fewer as of January 1 of the sale year are taxed at the short-term rate of approximately 39.6 percent combined.

This distinction is consequential. On a ¥20 million capital gain, the long-term resident tax is ¥1 million; the short-term resident tax is ¥1.8 million. The difference is ¥800,000 on resident tax alone, before the income tax differential is considered.

Critical timing for 2026 buyers: To qualify for long-term treatment on any sale in 2026, the property must have been acquired on or before December 31, 2020. A property acquired January 1, 2021 or later will be taxed at the short-term rate on any 2026 sale, regardless of the number of calendar years held. For properties acquired in 2021, the earliest sale date qualifying for long-term treatment is any date in 2027, when January 1, 2027 will show more than five years of ownership.

Foreign buyers who occupy the apartment as their primary residence in Japan may claim the primary residence exemption (居住用財産の3,000万円特別控除). This exemption allows sellers to deduct up to ¥30 million from taxable capital gains on the sale of a primary residence. The exemption applies to both long-term and short-term gains. However, non-residents who have vacated the property must sell within three years of the year they moved out to retain eligibility. A foreign buyer who purchased a ¥150 million apartment in 2021, lived in it as a primary residence through 2025, and sold it in 2027 for ¥165 million would realize a ¥15 million capital gain. The primary residence exemption would eliminate the entire tax liability, resulting in zero capital gains tax.

Without the primary residence exemption, the same transaction would generate approximately ¥3 million in long-term capital gains tax (¥15M × 20.3%), or ¥5.9 million at short-term rates if sold in 2026 instead of 2027. The timing of the sale and the residency status are therefore not minor details but material determinants of after-tax proceeds.

Inheritance Tax Reform 2027: What Foreign Buyers Need to Know

On December 19, 2025, Japan’s government published the FY2026 Tax Reform Outline (令和8年度税制改正大綱), which contains a landmark change to inheritance tax valuation effective January 1, 2027. This reform fundamentally alters the estate-planning calculus for HNW foreign buyers acquiring Tokyo property in 2026.

Under the current framework (through December 31, 2026), real estate is valued for inheritance tax purposes using the road-frontage price method (路線価方式), which typically produces valuations 20 to 40 percent below market value. A ¥150 million apartment might be assessed at ¥100 million for inheritance purposes, resulting in a ¥50 million valuation discount.

Beginning January 1, 2027, rental real estate acquired within five years of death or gift will be assessed at approximately 80 percent of the acquisition price, rather than the road-frontage price method. Properties held more than five years continue to use the existing framework. This change is consequential: a ¥150 million apartment acquired in 2026 and inherited in 2028 (within the five-year window) will be valued at approximately ¥120 million for inheritance purposes, not the ¥100 million under the old road-frontage method. The valuation discount shrinks from ¥50 million to ¥30 million.

The reform also eliminates a popular HNW estate-planning vehicle: real estate small-lot products (不動産小口化商品) will be assessed at near-market value regardless of holding period, closing a tax-arbitrage opportunity that previously existed.

Implication for foreign buyers: The strategy of purchasing Tokyo investment property shortly before death to compress inheritance tax valuation is being closed. Buyers acquiring in 2026 who die before 2032 will face near-market valuations for inheritance purposes. If estate planning is a material motivation for the purchase, the 2027 reform warrants discussion with a Japanese tax advisor (税理士, zeiri-shi) before acquisition.

For buyers using the apartment as a primary residence, the small-lot-land special measure (小規模宅地等の特例) continues to provide an 80 percent reduction in assessed value for up to 330 square meters of primary residence land, regardless of the 2027 reform. This exemption remains one of the most powerful estate-tax tools available to foreign residents in Japan.

Tokyo Apartment Prices and Market Trends in 2026

The Tokyo residential market in 2026 reflects competing pressures: record nominal prices alongside recent monthly declines. According to data from March 2026, the average price of previously occupied apartments in Tokyo’s six central wards stood at ¥187.3 million, down 0.2 percent from February. Over the same period, the average price of new condominiums in Tokyo’s 23 wards reached a record ¥137.84 million in fiscal 2025 (April 2025 to March 2026), according to the Real Estate Information Network (REINS, the national MLS).

The divergence between new and used prices reflects several factors: new construction commands a premium for warranty and modern building codes, while used apartments in prime neighborhoods (Azabu, Hiroo, Shirokane, Minato-ku) retain value through location and established community infrastructure. A three-bedroom apartment in Hiroo with an assessed value of ¥150 million typically trades between ¥155 million and ¥165 million depending on floor level, view, and renovation status. The same unit in Azabu may command ¥170 million to ¥185 million.

Foreign buyers should note that prices are not uniformly distributed. Tokyo Apartments for Sale in 2026: Prices, Neighborhoods, and What Foreign Buyers Must Know provides neighborhood-by-neighborhood pricing detail. Properties below ¥100 million are concentrated in outer wards (Setagaya, Meguro, Shinagawa); properties above ¥200 million cluster in central Minato-ku and Shibuya-ku.

The March 2026 price decline, though modest at 0.2 percent month-over-month, follows two consecutive months of increases and may signal market normalization after the record prices of late 2025. For foreign buyers, this moment presents an opportunity to acquire at slightly reduced valuations before potential recovery. However, the decision to buy should be driven by long-term occupancy or investment thesis, not short-term price timing, given the tax complexity and transaction costs outlined above.

Step-by-Step Guide to Buying Property as a Foreign Buyer in Tokyo

The process of acquiring an apartment in Tokyo as a foreign buyer involves multiple regulatory and fiscal checkpoints. Understanding the sequence and the role of each specialist is essential to avoiding costly errors.

Step 1: Establish tax residency and visa status. Before committing to purchase, confirm your tax residency status in Japan. If you hold a work visa or permanent residency (永住権, eijuuken), you are treated as a Japanese tax resident and subject to full Japanese income tax on worldwide income. If you hold a temporary visitor visa or are on a short-term assignment, you may be classified as a non-resident for tax purposes, which affects capital gains tax treatment and inheritance tax liability. Consult a tax advisor (税理士, zeiri-shi) to clarify your status before acquisition. Step 2: Obtain mortgage pre-approval (if applicable). Foreign buyers typically face stricter mortgage requirements than Japanese residents. Most Japanese banks require either permanent residency or a stable employment contract with a Japanese employer. Non-residents may find mortgage access limited to specialized lenders or may be required to post a larger down payment (30 to 50 percent instead of the standard 10 percent). Obtain pre-approval in writing before beginning property search. Step 3: Engage a licensed real estate transaction specialist. A 宅建士 (takken-shi, Japan’s licensed real estate transaction specialist) should handle the property search, initial due diligence, and negotiation. The takken-shi is statutorily required to conduct the 重要事項説明 (juuyou-jikou-setsumei, the mandatory pre-contract disclosure meeting) and must hold a current license issued by the Tokyo Metropolitan Government. This specialist is distinct from a real estate salesperson and carries professional liability. The Most Expensive Apartments in Tokyo: 2026 Price Guide for Serious Buyers outlines the neighborhoods and price points where specialist guidance is most valuable. Step 4: Conduct due diligence. Before signing the purchase contract, verify the property’s legal status through the Legal Affairs Bureau (法務局, hōmu-kyoku). Request a title search (登記簿謄本, tōki-bo tōhon) to confirm ownership, encumbrances, and mortgage status. Engage a structural engineer (建築士, kenchiku-shi) to inspect the building for defects, especially if the apartment is more than 20 years old. Request the building’s 管理規約 (kanri-kiyaku, management rules) and financial statements to understand maintenance fees and special assessments. Step 5: Negotiate price and terms. In Tokyo’s current market, negotiation is possible on used apartments, particularly those listed above ¥150 million. Sellers may accept 2 to 5 percent reductions if the buyer demonstrates financial capacity and offers a shorter closing timeline. New apartments have fixed prices and limited negotiation room. Step 6: Execute the purchase contract and pay earnest money. Once terms are agreed, the purchase contract (売買契約書, baibai keiyaku-sho) is signed. The buyer pays the 手付金 (tetsuke-kin, earnest-money deposit), typically 10 percent of the purchase price. This amount is held in escrow by the real estate agency or a third-party intermediary until closing. At this point, the takken-shi must conduct the juuyou-jikou-setsumei, a statutory meeting at which all material facts about the property are disclosed in writing. Step 7: Arrange financing and conduct final inspections. The buyer’s mortgage lender conducts a final appraisal. The buyer arranges fire insurance (火災保険, kasai-hoken), typically required by lenders. A final walkthrough is conducted 24 to 48 hours before closing to confirm the property’s condition and that agreed repairs have been completed. Step 8: Complete closing and register ownership. At closing, the buyer transfers the balance of the purchase price (typically 90 percent minus the earnest money) to the seller via bank transfer. The seller’s takken-shi and the buyer’s takken-shi exchange documents, including the deed (権利書, kenri-sho, or in modern form, the 登記識別情報, tōki-shikibetsu-jōhō, registration identification information). A 司法書士 (shihou-shosho, judicial scrivener) is engaged to file the ownership transfer with the Legal Affairs Bureau. The property is now registered in your name, and you receive the registration certificate (登記簿謄本, tōki-bo tōhon) confirming ownership. The entire process from contract to closing typically takes 30 to 45 days. Step 9: Register for property tax and obtain a tax ID. Within 30 days of closing, the property is assessed by the Tokyo Metropolitan Government for fixed asset tax and city planning tax purposes. You will receive a tax notice (納税通知書, nōzei-tsūchi-sho) approximately 60 days after closing, with the first payment due by the end of the fiscal year (March 31).

Tax Deductions and Exemptions for Tokyo Residential Property

Foreign buyers should be aware of several tax deductions and exemptions that reduce the total cost of ownership and may justify acquisition in 2026 despite the tax complexity.

New residential building reduction: As noted above, newly constructed apartments receive a 50 percent reduction on fixed asset tax for five years (seven years for certified long-term excellent housing). On a new ¥150 million apartment with ¥90 million assessed value, this reduction saves approximately ¥315,000 in fixed asset tax over five years. Small-scale residential land special measure: For land up to 200 square meters, the taxable base for both fixed asset tax and city planning tax is reduced to one-sixth and one-third respectively. This reduction is permanent and applies regardless of whether the building is new or used. For a typical Tokyo condominium with 50 to 80 square meters of land apportionment, this reduction saves ¥100,000 to ¥200,000 annually in holding taxes. Primary residence exemption on capital gains: As discussed above, the ¥30 million exemption for primary residence sales can eliminate all capital gains tax liability on gains up to ¥30 million. For a buyer who purchases at ¥150 million, lives in the apartment for five years, and sells at ¥165 million, the ¥15 million gain is entirely tax-free. Mortgage interest deduction (for Japanese tax residents only): Japanese tax residents who finance a residential purchase with a mortgage may claim a deduction of up to 1 percent of the outstanding loan balance (up to ¥40 million) against income tax for the first 10 years of the mortgage. Non-residents do not qualify for this deduction. For a ¥100 million mortgage at 2 percent interest, the annual interest is ¥2 million; the deduction (assuming the 1 percent cap applies) is ¥1 million, resulting in approximately ¥300,000 in income tax savings annually for a high-income earner in the top tax bracket.

These deductions and exemptions can reduce the effective cost of ownership by 15 to 25 percent over a five-year holding period, making the tax framework less onerous than the headline rates suggest.

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Koukyuu is a private buyer’s advisory for distinguished Tokyo residences in Minato-ku (港区), Shibuya-ku (渋谷区), and Chiyoda-ku (千代田区), focused exclusively on transactions of ¥300 million and above. A licensed 宅建士 (takken-shi) personally handles every stage of the engagement, from the first consultation to the signing, a continuity most Tokyo agencies do not offer. Book a private consultation) to discuss your acquisition strategy.