Offering a ‘Reward’ to the Landlord?… The Unique Structure of Japan’s Rental Market [Kim Yongnam's Real Estate Asset Management]

The Japanese housing rental market operates on a risk management philosophy entirely different from that of South Korea. Investors experienced in studio or officetel investments in Korea have primarily perceived rental risk as a matter of deposit refunds. Whether for jeonse (lump-sum deposit) or monthly rent, the landlord's biggest burden has always been whether they can return the deposit at the time of move-out.

However, the Japanese housing rental market is different from the very beginning. In Japan, the key risk is not the deposit but the payment of monthly rent, and the entity that bears this risk is not the landlord but a guarantee company. This difference is not a matter of custom but is clearly revealed in the lease structure itself.

A look at a housing rental case in central Tokyo clarifies where the entry barriers to the Japanese rental market lie. In Japan, the initial costs that a tenant must bear at the contract stage are very high. This is not simply because the monthly rent is high, but because the structure is designed to have various costs paid at once at the time of the contract.

The most noticeable item among the initial costs is the ‘reikin’ (key money), which is difficult to find in Korean lease agreements. Reikin is a customary payment to the landlord and is not returned at all upon moving out. Unlike the jeonse deposit or monthly rent deposit in Korea, which are temporarily entrusted funds, it is a cost that disappears upon signing the contract. Therefore, investors or tenants should not mistake this item for recoverable funds and must recognize it as a non-refundable expense included in the initial investment or living expenses.

Another important item is the guarantee fee incurred when using a rental guarantee company. In Japanese lease agreements, it is traditional to require a joint guarantor for the tenant. However, for foreigners or tenants who have difficulty finding a personal guarantor, a rental guarantee company acts as a substitute. The guarantee fee incurred at this time is not a simple commission but a cost to institutionally transfer the risk of rent arrears.

In addition, Japanese rental contracts include various living-related service costs. A typical example is the so-called '24-hour安心support' (24-hour peace of mind support) service. This is a system that provides constant support for emergencies that may occur while the tenant is residing, such as lost keys, water leaks, plumbing problems, and electrical troubles. In Korea, when such problems occur, tenants often have to call a private company themselves or rely on the management office. In contrast, in Japan, such living risks are institutionally managed at the contract stage.

In addition, insurance premiums and various management-related costs are included in the initial costs, and most of them are not refunded upon moving out. While the burden of individual items may not seem large, as these costs accumulate, the amount required at the beginning of the contract rises to a considerable level.

As such, the initial rental costs in Japan have a structure that includes non-refundable items such as security deposit, key money, brokerage fees, guarantee company fees, insurance premiums, and living support service fees all at once. This shows that the Japanese rental market is not simply about receiving rent, but is designed to settle financial and living risks that may arise during the tenant's residence process before moving in.

Ultimately, Korean investors or tenants seeking to enter the Japanese housing rental market should pay more attention to the nature of the initial costs than the level of monthly rent. In particular, if they do not fully recognize the structural existence of non-recoverable costs such as key money and guarantee insurance premiums, their financial plans can be easily distorted.

If the Korean rental market is a market that worries about risks after moving out, the Japanese rental market is a market that filters out risks before moving in. The moment this structural difference is understood, Japanese housing investment begins to be seen not as an unfamiliar foreign market, but as an investment target that can be interpreted with clear logic.

<Korea Economic The Moneyist> Kim Yongnam, CEO and President of GlobalPMC Co., Ltd.