"Freehold is definitely GOOD and Leasehold no need to consider"
It quite norm that elder generation property buyer frequently preferred "Freehold good, Leasehold bad."
This have been quite a debate for many years, is Freehold the main concern and the must factor to be considered?
Here, whether a piece of property is freehold or leasehold may or may not matter depends on why you’re buying the property for.
Freehold vs Leasehold: The Fundamentals
Freehold means that you have the ownership of that property forever, and you can pass it on to whoever you want.
On the other hand, if your property is leasehold, the tenure is limited – usually by (the maximum) 99 years if you bought your property from the developer, and much less unless you’re getting an extension.
For the lease is approaching the end or owner want to get extension of lease, the owner will need to apply to the state government for an extension of the lease. If the application is approved, a premium is payable depending on the prevailing market value of the land.
There have been argument that leasehold properties capital appreciation is must lesser than freehold properties.
Actually, there’s evidence that values of both freehold and leasehold properties appreciate at a similar rate for the first 20+ years.
However, nearing the end of its tenure, the value of a piece of leasehold property predictably stops going up. In this respect, freehold properties win in the longer run, as far as value appreciation is concerned.
Additionally, older leasehold properties are also harder to sell because of the uncertainty in the renewal of the lease (which is under complete discretion of the local authorities).
Also, bank loans are harder to come by for leasehold properties with shorter tenures. Even if you manage to get a loan, the margin of financing may be comparatively lower to that of freehold properties.
As with everything else, prices of property are determined by the sacrosanct law of supply and demand, and if freehold properties are more popular, naturally, they will fetch higher prices, both in the short run and the long run.
Location remains the biggest driver of demand in real estate, and you’ll see that some of the best locations in the Klang Valley are leasehold – for example: Bandar Sunway, (large swathes of) Petaling Jaya old town, Tropicana (near the golf course) and the Seputeh area in KL.
There is no doubt that the freehold status is a strong selling point for new projects. As such, developers understand the need to “make up” for the leasehold status of a new project that they want to launch. Therefore, for new projects at least, leasehold properties often give a better bang for the buck in terms of features, design, and concept when compared to freehold properties.
Finally, understand that freehold properties are limited in availability, and so the question of freehold vs leasehold will most probably be moot sometime in the future – simply because the buyers won’t get much of a choice. Actually as long as the whole area is same tenure leasehold, that shall not be an issue, unless the property you looking is the only limited leasehold in the freehold area, then that will be disadvantage on investment point of view.
So in the end, does it matter whether its Leasehold or Freehold?
If there is a comparison within same area, you should always opt for properties with freehold status. However, whether a property is freehold and leasehold should be secondary compared to other factors like different location, developer reputation, concept, amenities and upside opportunity.
Now with the price of houses being the biggest concern especially among first-time buyers, it’s a question of whether a piece of property is affordable and worthy, tenure like freehold or leasehold is no longer the main concern.
Also, freehold properties now is getting lesser and lesser. For developer properties, the sales package also take into the consideration as some giving more rebates and cash back. Some Guru have been teaching on multiple submission and cash out ideas which affect buyers view on the properties.