Are you checking at property for sale in Malaysia as you plan to buy a property on your own? With the many available housing schemes in Malaysia, such as Rumah Mampu Milik and PPA1M Putrajaya, buying a house is not difficult anymore. Many people still cannot decide which type of property to choose: freehold or leasehold. This article will guide you through the differences between a freehold property and a leasehold property.
A freehold property is having the outright ownership of the property and land on which it stands. That also means the owner of the land has no time limit to the ownership period. Most developers build bungalows, condominiums and private housing on a freehold land.
Having a freehold land comes with its benefits as well. First of all, the owners are able to transfer the land to interested buyer with lesser limitations. In addition, they are also allowed to subdivide the land and allocate their land according to their wills, however, subject to the town planning controls.
Typically, a freehold property will have a stable growth if the property is taken good care of and is in good condition. There might also be a chance of redevelopment for the old freehold properties. In this case, the owners will then be compensated.
With a leasehold title, it means that you own the property and the land with a certain period of the lease agreement with the freeholder.
As the name mentioned, property with a leasehold title will have to be responsible for the land and maintenance need to be done. If the land is not well taken of, the state will deem the tenant as unfit and the tenure might be compromised.
a. Longer time to sell
Unlike properties with a freehold title, the ownership period for leasehold property can only gain grant approval for the transfer of lease by the state, or equivalent. In addition, it requires 3 + 1 months for the sale of leasehold property to take place, which will only begin after getting the consent from the state, usually between 6 months to 1 year.
b. Lower value
It is known that leasehold property after 30 years, the value of the property will then depreciate or even stay stagnate all the way until the end of the lease. In addition, assuming both leasehold property and freehold property having the same specifications, the price for a property with leasehold title is usually approximately 20% lower than a property with freehold title.
c. Harder to secure a loan
Securing a bank loan for a leasehold property is usually much harder as compared to getting a loan for freehold property, especially leasehold property with lesser than 50 years lease period. Banks tend to favor leasehold property with at least 75 years lease.
In conclusion, whether to invest in a freehold property or leasehold property will still depend on your budget and how much you can afford.