When buying a home, attention tends to go to the purchase price and one-time costs, but there are also expenses that continue after you move in: fixed asset tax (kotei shisan zei) and city planning tax (toshi keikaku zei), management fees and a repair reserve fund (shūzen sekitate-kin) if you're buying a condo, and fire insurance (kasai hoken) and earthquake insurance (jishin hoken). Here we lay out the full picture of these running costs and how to factor them into your funding plan.
- Fixed asset tax and city planning tax are levied each year on whoever owns the property as of January 1.
- Condos carry monthly management fees and repair reserve fund contributions on an ongoing basis.
- Fire insurance is effectively mandatory if you use a mortgage; earthquake insurance is optional and can only be added alongside fire insurance.
- Detached houses have no mandatory fee like a condo's management fee, but you need to set aside your own savings for repairs to the exterior walls, roof, and so on.
- At purchase, it's standard practice to settle that year's property tax with the seller on a prorated basis, as a tax settlement adjustment.
In short: plan with ongoing costs factored in
A home-buying funding plan should account not just for the purchase price and one-time costs, but also for the running costs that continue after you move in. Fixed asset tax, management fees and repair reserve contributions, and insurance premiums recur every year or every month without fail, so you need to check — alongside your mortgage repayments — that they fit comfortably within your household budget.
How fixed asset tax and city planning tax work
Fixed asset tax and city planning tax are levied each year on whoever owns the property as of January 1. The amount is calculated from the property's assessed value, and residential land qualifies for certain reductions. In the year you buy, it's standard market practice for the buyer and seller to prorate the tax between them based on the handover date. For the details of the tax system and current reductions, check with the National Tax Agency or your local municipal office.
A condo's management fees and repair reserve fund
In a condo, you pay a monthly management fee to maintain the shared areas and a repair reserve fund (shūzen sekitate-kin) to prepare for future large-scale renovations. The figures shown on the property flyer (maisoku) at purchase are simply the current amounts, and they may be raised in the future. See Putting "Buy the Management" into Practice: How to Judge a Pre-Owned Condo's Management for how to assess a building's management.
Where fire insurance and earthquake insurance fit in
If you use a mortgage, taking out fire insurance is generally a de facto requirement. Earthquake insurance can't be purchased on its own — it's an optional policy you add on top of fire insurance. Coverage details and policy terms vary with the property's structure and location, so it's worth comparing plans across several insurers.
Thinking about repair costs for a detached house
A detached house has no mandatory collection like a condo's management fee or repair reserve fund, but you still need to set aside your own savings, in a planned way, for repair costs tied to normal wear — repainting the exterior walls, fixing the roof, and so on. If you neglect this, you may find your cash flow squeezed when a large expense eventually comes due.
Building a funding plan that accounts for running costs
Alongside your mortgage repayments, add up fixed asset tax, management fees, repair reserve contributions, and insurance premiums on a monthly basis, and check that the total fits comfortably within your budget. See Setting Your Home-Buying Budget: Think in Terms of Repayment Ratio, Not Income Multiple for more on repayment ratios. Knowing the total running costs before you buy makes it easier to manage your household finances afterward. If you set your budget based on the purchase price alone, these ongoing costs can leave you with less breathing room than you expected — so plan for them up front.
Frequently asked questions
When do I pay fixed asset tax?
It's levied on whoever owns the property as of January 1 each year, and most municipalities let you pay it in around four installments over the year. In the year you buy, it's standard practice to prorate the amount with the seller based on the handover date.
Can the repair reserve fund go up in the future?
Yes. The management association may vote to raise it in line with large-scale renovation plans or updated construction cost estimates. Checking the management association's long-term repair plan makes it easier to anticipate future increases.
Is fire insurance or earthquake insurance mandatory?
If you use a mortgage, fire insurance is generally treated as a de facto requirement. Earthquake insurance is optional, but it can only be purchased alongside fire insurance.
Summary
After you buy a home, running costs continue — fixed asset tax, management fees and repair reserve contributions, and insurance premiums. Alongside your mortgage repayments, get a full picture of these costs before you buy, and build a funding plan you can comfortably sustain.