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Why not leasehold property? (updated)

Posted in Property, KL / Selangor

My cousin sister has moved into her spanking new leasehold condo last year. After waiting for 3 years plus including some minor renovations, she has moved into her new home which she said comfortable and how lucky for her to have gotten such a place amidst all the high prices these days everywhere in Klang Valley. Yes, it’s a leasehold. The current place that I am staying is also leasehold. My next condo that I am moving to next month? Leasehold too. Am I crazy over leasehold properties?

Many years ago, she asked me about the property. She said, ‘but it’s leasehold’. I told her, the current place you are staying also leasehold, do you feel anything wrong with it? She laughed. Anyway, I briefly explained. 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. Seriously, you expect the government of the day to just ask the hundreds if not thousands of people in your condo to MOVE OUT? Just like that?

Let’s be very honest. If 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. Another example, Damansara. Long time ago, Damansara was also shunned upon. Today, the only ones not sold yet would soon be snapped up because the MRT station will be up to Sungai Buloh.

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

revised on 1 March 2014

Next suggested article: First home? buy leasehold

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8 Comments

  1. Good example for own stay. However, imho, the selling price may not be as good as freehold say, 40 years later due to bank will be conservative when giving out mortgage loan to the new buyer. From investment point of view may be slightly disadvantage.
    Just my 0.0002 cents

    July 4, 2014
    |Reply
    • No doubt, true Bryan. 40 years is however a long time later. Tough to see what may happen.

      July 5, 2014
      |Reply
  2. SK
    SK

    Hi,
    I like your explanation on ‘own stay strategy’.
    No doubt leasehold is not a problem for ‘forever own stay’ strategy.
    But if for ‘investment / hold for 5-10 yrs and then sell-off’, how do you see it for a 80-year leasehold property (as of today 2014)?
    let’s say today I buy a 700k condo with 80 yrs lease tenure, with a good 90% loan margin from bank. If I use it for own-stay or investment, but after 8-10 years I sell it off with maybe 900k-1mil (conservative appreciation). With only 70+ years leasehold period, will the new buyer able to secure max 90% loan from the bank? or even 80% loan margin?
    It’s going to be tough to dispose such high price of leasehold property at that time….
    Do you have banker frens that close a successful case of giving 85-90% loan margin to a 60-70 yrs leasehold property? It’s good to find out what is bank’s policy on this case…

    July 6, 2014
    |Reply
  3. Vincent
    Vincent

    Only major disadvantage is the renewal of leasehold which makes it very expensive to own; yes it might be cheaper now, but in time, when you have only 20-30 years left you would want to renew the lease which would be based on the current price of that day. While you wont have this problem with a Freehold property – which in the long run is cheaper to own IMHO. However, Freehold properties are hard to find.

    September 29, 2014
    |Reply
    • Hi Vincent, very true. It’s cheaper today to own. My personal view is however I may not be around when it’s left 20 years. I would think by then that property would be worth paying to extend the lease for. Yes, if I can only choose one, of course freehold is better.

      September 29, 2014
      |Reply
  4. Lotus
    Lotus

    Leasehold title might have some impact to property investors. It might take longer time just to get state approval for ownership change. One might missed the chances in the market of that time.

    November 9, 2017
    |Reply
    • Yea, it is true. It does take a few more months in comparison. However there are certaintly many advantages for leasehold too. If same pricing level, of course I would opt for freehold too. 😁

      November 9, 2017
      |Reply

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