Since the onset of the pandemic, rumour had it that banks throttled lending for individual investors looking to buy properties in Japan.

With more than 2 years into the pandemic, it is valuable to look back and see what has actually happened to lending for the buy-to-let segment during these unprecedented times. 

Before we begin, please note that the data outlined below refers specifically to retail investors and not their institutional counterparts. 

Investment property loan rate trends

Based on the survey conducted during October 2021 by Kenbiya, a property investment information site, 50.8% of the borrowers said their interest rates were between 1% and 2%.

Compared with the results in previous 2 years, the % of borrowers with interest rates lower than 1% had a notable drop,  while the % of borrowers with interest rates between 2% and 3% had a significant increase.

This data implies that while the lending is still available, the banks are prone to pricing in their higher risk of lending with higher interest rates. 

One should note the relatively small sample size for Kenbiya’s data.  200 respondents were surveyed, 59 of whom said they have a mortgage. Hence this data should be treated as inconclusive but better than nothing. 

Pandemic impact on Japan’s investment property market 

According to data from the Real Estate Economic Institute, 140 reinforced concrete multifamily investment properties were sold in Greater Tokyo in 2020, an increase of 6.1% Year-on-Year (YoY) . 

The number of units sold was 6,260, up 4.7% YoY.

In the first half of 2021, sales of reinforced concrete multifamily investment properties reached 76, a 1.3% YoY rise.  

The number of units sold rose 4.8% YoY to 3,650 in the same time frame.

We might need to wait until August 2022 to see the complete sales data for 2021, however the 2021 first half results imply that despite the pandemic, there was not a negative impact on the demand for investment properties in the Greater Tokyo Area.

Financing for investment property

The Bank of Japan data show that the number of borrowers for investment properties reached 614,632 as at September 2021, up 2.2% from September 2019.

In terms of outstanding loans, it was around 28 trillion yen as at September 2021, little changed compared to the balance prior COVID-19.

The above data indicates that the domestic bank mortgage lending did not significantly abate.  Paired with the above interest data, one can assume that lending demand is still being fulfilled, albeit at higher interest rates to price in the higher perceived lending risk during the pandemic.

For overseas buyers, since most local banks require the mortgage contracts to be signed in Japan, many investors are not able to borrow during the pandemic as Japan’s borders have been closed to non-residents.

In some cases, non-resident investors can obtain yen loans from banks in their home countries, provided that those banks have branches and operations in Japan. 

This option however usually comes with higher interest rates and larger down payments than those of local banks.

You can find the mortgage details for foreign nationals provided by some of the banks listed below. 

Shinsei Investment and Finance
(For HKSAR or Japanese passport holders residing in Hong Kong)

Tokyo Star Bank
(For Taiwanese passport holders residing in Taiwan)

SMBC Trust Bank
(For foreign nationals residing in Japan) 

Orix Asia Limited
(For Hong Kong ID holders)

Bank of China
(For Chinese passport holders)

Bank of Communications
(For Chinese or Japanese passport holders residing in Japan)

Further Reading

Real Estate Economic Institute Complete 2020 and 2021 First Half Condominium and Multifamily Investment Property Report (Japanese only; August, 2021)