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Freehold vs Leasehold in Japan
In Japan, freehold (shoyuken, full ownership) means you own the land forever, with no nationality restriction and no expiry - one of the genuinely great features of this market for foreign buyers. Leasehold (shakuchiken, the right to use someone else's land; teiki-shakuchiken, a fixed-term version that simply ends) gets you a lower entry price in exchange for ground rent and, in the fixed-term case, a hard expiry date after which you hand the land back. The trade-off is real but lopsided: you are buying a discount today against a financing problem and a resale problem tomorrow. Most foreign buyers should understand leasehold mainly so they can recognise it and price it correctly.
| Aspect | Freehold (shoyuken) | Leasehold (shakuchiken / teiki-shakuchiken) |
|---|---|---|
| What you own | The land and the building, outright and in perpetuity. No ground rent, no landlord. | Only the right to use the land; the building sits on someone else's dirt. You pay ground rent. |
| Time horizon | Forever. Passes to heirs with no clock running. | Fixed-term (teiki) leases typically run ~50 years then end - land reverts, often building demolished. |
| Entry price | Higher - you are paying for the land you keep. | Lower, sometimes 20-30% cheaper, which is the entire appeal. |
| Financing | Banks lend readily; the land is solid collateral. Easiest path for a foreign buyer. | Japanese lenders are wary, especially as the lease shortens. Often a cash-heavy or no-loan deal. |
| Resale and liquidity | Deep buyer pool, clean title, straightforward exit. | Shrinking buyer pool as the clock ticks; value decays toward zero near expiry. |
| Ongoing cost | Property tax only on what you own outright. | Property tax plus ongoing ground rent (jidai) to the landowner - a permanent cash drag. |
The verdict
For nearly every foreign investor or relocator, choose freehold. The land-ownership-forever feature is the reason Tokyo is so attractive to overseas buyers in the first place - throwing it away for a discount usually makes no sense. Leasehold, and especially fixed-term teiki-shakuchiken, only pencils out in narrow cases: a pure cash buyer with a defined exit shorter than the lease, or a prime-location building where freehold is simply unavailable and the discount genuinely compensates for the financing and resale friction. If you need a mortgage, plan to hold long-term, or care about a clean resale, leasehold's lower price is a trap, not a bargain. When in doubt, pay for the land.