When it comes to property or real estate investing, people always talk about location, location and location. But some of these investors are a little bit greedy because they want good location, affordable price and it must be FREEHOLD. Sadly, there’s no such thing in Malaysia (one of my friends is actually looking for a freehold property in KLCC area for 200k….. I told him that he can only get a toilet for that price)
We all know about the importance of location and price (nobody wants a 600 sq ft condo in Klang for 2 million) but for the purpose of this post, let’s focus on the Freehold vs Leasehold argument.
Based on what I know, most people love freehold properties especially the older generation. The idea of having their properties (bought with their hard earned money)
turn into dust after …say…99 years, is not appealing to them at all. After all, these people buy properties so that they can pass the properties down to their descendants for generations to come.
However, to tell you the truth, there is not much difference between leasehold and freehold. Firstly, the 99 years associated with most leasehold properties, can be renewed. Well, at least most of them can be renewed. Locations such as Tropicana has been renewed for quite a number of times in the past. Some of them got renewed when it has 50-60 years left. That is why I also believe that leasehold areas such as Mutiara Damansara, and KLCC area will still be renewed once their current lease expires. Conclusion, a renewable lease is not much different than a freehold.
Secondly, 99 years is an awful long time. Are you sure you’re going to last that long? And do you think your property is going to be well-maintained for that long? I seriously cannot imagine how the current condominiums in Mont Kiara or KLCC will look like after 100 years. That’s why I’m quite skeptical about those condominiums which are freehold because if the management is poor, it’ll not even last 10 years, not to say 99 years! However, when it comes to landed property, I must say freehold is still much preferable because maintaining the house is up to you, not other people.
Thirdly, almost all the properties or real estates which are located in the so-called “golden” area consist of leasehold properties. This also means that if you want to get freehold properties, you will need to go a bit further from these popular areas. But if you still want to get into such popular areas, then I’m afraid you will have to face the reality that most of them are leasehold properties.
Fourthly, the price tags are actually not much different between freehold and leasehold properties. Why? Because of the location. As I mentioned earlier, freehold properties tend to be located a bit further from the popular areas and this factor has actually made them cheaper (but some property developers are using the “freehold” excuse to increase the price tag)
whereas leasehold properties located in popular (so-called prime locations)
areas can actually fetch quite a good price both in primary and secondary market.
So after all those talks and reasoning, which is better? Freehold or leasehold? In my opinion, not much difference actually. Each has its own pros and cons. For me, leasehold is more suitable for condo and freehold for landed properties. But if it is a landed property in leasehold, then we must ensure that the lease can be renewed.
Hope it helps. And do feel free to comment and give your thoughts. I’m a newbie after all P/S…..By the way, you might still find a freehold property at a cheap price…but the location might not be favorable. For example, when SP Setia first launched the Setia Alam concept, the houses there were pretty cheap. The first few people who bought that area were willing to risk it and believed in the SP Setia’s vision of a “complete” township. Low price tag for high risk investment. Few years down the road, more and more people decided to put their money into the Setia Alam concept and the price tag has now rose up to ….well…pretty expensive.
Posted by Alvin Lim