Freehold is forever. Leasehold is temporary. Well…

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That never ending debate on freehold versus leasehold? That freehold is forever and leasehold means it’s not forever? Or that nothing will happen to freehold land while with leasehold there’s uncertainty? I have to write about this because a prominent property speaker mentioned that buying freehold property is extremely important no less than 4 times within a 30 minute forum session.

Okay, I have to agree with him that if given a choice of two identical properties with an identical price tag, I will also choose freehold. However, this is seldom the case. An attractive property may just be on a leasehold land while a not so awesome property may just be on a freehold land. So, which on to choose then? Maybe we run through 3 Q&As as below then, shall we? Decision is definitely all yours to make. For me, my choice is clear. It’s all about the property, not the ‘hold’ part. Haha.

Capital appreciation. Freehold is better than leasehold! (People say lah) Truth is, I have yet to find a conclusive report showing this. However, I have owned both freehold and leasehold properties and I have found no actual difference when it comes to price increase. It depends on just the property’s attractiveness and never whether it’s freehold or leasehold.

Renewal will ‘kill’ you. (Too expensive) Now, people wants to say that but with the leasehold expiring soon, it’s price sure start to go down. Well, ONLY if one refuses to renew the lease. Now, they will tell you it will cost you millions! Fortunately for all of us, we have this Article in edgeprop.my and this is now the calculation for the renewal of your leasehold works. It does not cost you millions… for the usual properties in the market.

Image credit: Edgeprop.my

Government can take back your land! Imagine a few thousand units of properties within a leasehold area and it’s about to expire soon. The government has no use for the land. Do we think the government will forcefully take it back by NOT allowing the people to renew the lease? Seriously, the government will prefer to stay as the government by being the government for the people and by the people instead.

Now imagine an important transportation masterplan that will have to cut through a freehold land of a few thousand units of homes but it will benefit the whole city of 10 million people for a long time to come. Do we believe the government will decide NOT to use the Land Acquisition Act (LAA) 1960 (click here to read more if you want on LAA 1960) and pay the owners’ market rate compensation and instead continue to allow the 10 million people in the city to suffer from unimaginable traffic jam? Sorry yeah, even freehold land has no FOREVER.

Stay focused. WHY do we want to buy that property. If the due diligence has been done and everything’s good, please go ahead even if it’s on a leasehold land. You should never be too concerned on the land status. I know, for some countries, the leasehold land may just be more serious because of land scarcity issue. In Malaysia, this should not be the deal-breaker. As the marketing ad says, “diamond is forever.” Very true for its elements but it’s value as a secondary diamond ring will not be increasing year after year. Meanwhile for leasehold, keep renewing the lease and it may just be forever… Happy buying!

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