Since the start of the pandemic, banks were rumored to be limiting lending to individual investors seeking to purchase properties in Japan.

With over 2 years of the pandemic, it’s worth looking back and seeing what really happened to lending for the buy-to-let segment during these unprecedented times.

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

Evolution of investment property loan rates

According to the survey conducted in October 2021 by Kenbiya, a real estate investment information site, 50.8% of borrowers said that their interest rates were between 1% and 2%.

Compared to the results of the previous 2 years, the % of borrowers with interest rates below 1% has decreased significantly, while the % of borrowers with interest rates between 2% and 3% has experienced a significant increase.

These data imply that as long as loans are still available, banks are inclined to price their loan higher risk with higher interest rates.

Note the relatively small sample size for the Kenbiya data. 200 respondents were interviewed, 59 of whom said they had a mortgage. Therefore, this data should be treated as inconclusive, but better than nothing.

Impact of the pandemic on the Japanese investment property market

According to data from the Economic Institute of Real Estate, 140 reinforced concrete multi-family 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% year-on-year.

In the first half of 2021, sales of reinforced concrete multi-family investment properties reached 76, up 1.3% year-on-year.

The number of units sold increased 4.8% year-on-year to 3,650 during the same period.

We may have to wait until August 2022 to see full sales data for 2021, but the results for the first half of 2021 imply that despite the pandemic there has been no negative impact on demand for investment properties in the Greater Tokyo area.

Financing of an investment property

Data from the Bank of Japan shows that the number of borrowers for investment properties reached 614,632 in September 2021, up 2.2% from September 2019.

In terms of outstanding loans, it was around 28 trillion yen in September 2021, little change from the pre-COVID-19 balance.

The above data indicates that domestic bank mortgage lending has not declined significantly. In combination with the interest data above, it can be assumed that loan demand is still being met, albeit at higher interest rates to account for the perceived higher loan risk during the pandemic.

For overseas buyers, since most local banks require mortgage contracts to be signed in Japan, many investors are unable 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 country, provided these banks have branches and operations in Japan.

However, this option usually comes with higher interest rates and larger down payments than local banks.

You can find 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 card holders)

bank of china
(For Chinese passport holders)

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

Further reading

Real Estate Economic Institute Comprehensive report on multi-family condominiums and investment properties for the first half of 2020 and 2021 (Japanese only; August 2021)