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Dont buy leasehold property

Posted in Buying Condos

I have to be honest, if prices are exactly the same and the location is the same, I would take freehold anytime. However, if you noticed, leasehold properties are typically cheaper. Perhaps 15-20% cheaper sometimes. Most of the time, the leasehold properties are also in good areas. As an example, Kelana Jaya.

A friend buying a new property for her own stay asked me if she should buy leasehold. She said her friends said, freehold is better. I said her friend is correct but is the leasehold property near her office, price is attractive and in a good location? She said yes to all. Then she said she scared because ONLY 99 years.

Let me explain as simple as I can. when you buy 99 years, you may be 30 years old. When you are 60 years old, your lease still have 60 years to go. By then your children is 30 years old. When you reach 90 years old and your son reaches 60 years old and your grandson reaches 30 years old, you still have 30 years left on your lease. When you are 120 years old, your son is 90 years old, your grandson is 60 years old and your grandson’s son is 30 years old, your lease expires. At that time, your grandson’s son’s son just born.

I hope you already get what I mean. If not, fine, please don’t buy leasehold. 🙂

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8 Comments

  1. […] apartment in Penang. I have nothing against leasehold at all. You can read about my thoughts about ‘leasehold’. As for the last reason, high density, I have never ever felt so before because the land area […]

    December 3, 2013
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  2. What u talking
    What u talking

    what… hahaha….

    December 4, 2013
    |Reply
    • haha… great that you get the light humour. we must buy objectively, not emotionally. freehold or leasehold, same if we do our homework.

      December 4, 2013
      |Reply
  3. Agree 🙂
    I think the bad thing about leasehold is that when the property is over 50 years (of 99 year tenure, it will be difficult to buy or sell because some banks are reluctant to borrow money for leasehold properties >50 years. A misconception (at least my part) about leasehold property is that when leasehold property reaches maturation, it will be demolished – the truth is that it isn’t necessarily so, because if there isn’t any major changes (such as redevelopment), then the government will allow re-leasing (but according to current market price). If comparing leasehold and freehold, the latter is better in the sense that if government wants to redevelop lands, freehold property owners will not see their property price diminishing during “buy back”, whereas leasehold property during buy back will be calculated based on pro rata basis. E.g. if property price is RM500,000 for 99 years, at 50 years old, the buy back will be half the price (or according to market price multiplied by the pro rate). The latter happens a lot in Singapore, not sure about in Malaysia because our leasehold is still YOUNG, except in PJ area where years ago when owners opted for re-leasing of their home – most was shocked to see prices soared to millions (according to current market), which most just couldn’t afford the re-leasing option.

    Bests,
    L

    December 4, 2013
    |Reply
    • u hav very good knowledge. should write more! glad to.hav u as an.expert commenter. thank u.

      December 4, 2013
      |Reply
    • i m also ipoh mali. proud.

      December 4, 2013
      |Reply
  4. Jeremy
    Jeremy

    The conversion of leasehold land in Penang to freehold requires the approval of the National Land Council. The state government has been trying every year to convert residential leasehold land to freehold. At the moment the renewal of residential leasehold land of 99 years is indefinitely. The owners have to pay only 10% of the premium (you get a 90% discount) I would prefer buying residential leasehold properties in a prime location because the chances of it being converted to freehold is there. So buyers of residential leasehold properties might be in for a windfall if eventually it gets converted to freehold.

    December 4, 2013
    |Reply
    • Hi Jeremy, thanks for your additional information. In fact the chances to convert to freehold is another good reason why we should never just brush off leasehold properties.

      December 4, 2013
      |Reply

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