My Real Estate Station - Freehold VS Leasehold Property. Why people always look for freehold property instead of leasehold property?
First, we need to understand what the meaning of Freehold and Leasehold.
Freehold means your ownership on property is without time limit. You are free to sell it to anyone at anytime. But, government still can acquisition your property under the law and you cannot say “no”.
On the other hand, Leasehold property means you are lease the property with the terms either 30 or 60, or 99 years. Upon the lease term expiry, you can renew the lease term with state authority.
Now, we back to the question.
Let’s start from the discussion on transaction process.
Freehold property can transfer easily. Once payment made, the ownership will be transferred. Normally, it takes 3 to 4 months the transaction will be completed.
However, leasehold property needs authority approval when we want to sell the property. Without approval, the transaction can’t proceed. So, no surprise, it takes longer time. The whole transaction will take 4 to 9 months.
Next, we discuss the impact towards property value.
Since there is no time limit on property ownership, Freehold property’s value will always follow the market condition. Obviously Freehold property could hedge the inflation and enjoy higher capital gain compare with leasehold property.
Well, due to leasehold property’s ownership has time limit. As the leasehold term decreased, the value will be decreased. Although it is not absolutely but in majority cases it happens.
Last, it affects your property financing application.
Most of us buy property by getting loan from banks. Bank will offer our loan base on several factors, one of it is the value of the property. Freehold property always welcome by banks.
But it is subjective to leasehold property because bank will factor in the remaining leasehold term. As leasehold term decreased, property value also goes down.Therefore bank will offer lesser loan amount to protect their interest.
One more thing, how about property with Malay or Bumi Reserve?
These properties are special allocate for Malay and Bumi buyer. They also classified into freehold or leasehold. So it’s no different. Non Malay still can buy these properties but need to fulfil the terms and conditions.
Shortly, Freehold property is better than Leasehold property. Therefore it is not surprise that people more prefer to buy freehold property. It leads freehold property is more pricy than leasehold property.
Here is My Real Estate Station. Thanks for listening/watching.
Presented by: Samuel Sing
Tags: My Real Estate Station - Freehold VS Leasehold Property, Malaysia Property, Freehold, Leasehold, Malaysia Real Estate