There is always a discussion on the worthiness of a property on Freehold or Leasehold. Summarized with the characteristics of these 2 types of land.
- Simple understanding: The state still owns the land and it is leased to you.
- has a limited duration of lease, usually 30, 60, 99 or 999 years.
- Transferring or selling of land must have the land office consent. (means, hassle to sell)
- lands less than 30 years, bank may not be able to finance a loan. (Take cautious the remaining years of your property before you buy)
- In general cases, lands less than 70 years, Margin of Finance may only up to 70%, 50 years, Margin of finance 60%, depends on banks, in other words, higher down payment for least remaining years.
- if land leasing expired, you will have to to renew your land title with Land & Survey department by paying a premium.
- Mostly located in prime/golden areas
- Has “Interest in perpetuity”, means you can own the property forever.
- The right of ownership can be passed to your heirs.
- Unlimited right to subdivide and aggregate of land subject to town planning controls.
- Usually located further from the popular areas.
Which to choose?
A common question to ask, but without a perfect answer.
Entirely Owning something and taking control of it, is a natural greediness humans instinct.
People always tends to have the perception that leased lands will downgrade the intrinsic value of its property, but this may not be entirely true, and the effect could be minor.
To choose either Freehold or Leasehold, really depends on your personal perception, investment strategy, and your purpose of buying these properties.
Rules of real estate is always “Location Location Location.”. Leased land could also fetch a higher value if it is located in prime/golden areas, for example, Tropicana, Mutiara Damansara, and KLCC are lease lands with sky rockets property values.
If your purpose of purchasing the asset is for investment purpose to generate passive income from rental or capital gain, will it really affect your decision?
if you have no choice to stay on a lease land, will you be able to live up to 99 years? Even if yes, the condition of your asset has drastically torn apart. Your children or grandchildren may not even be staying with you. of course, if you have the cash, freehold is at your choice.
Leasehold or Freehold, as long as it is in good location, definitely commands a price appreciation.
Posted: June 2nd, 2011 | Author: propertynoob | Filed under: For The Noob | Tags: Buying Guide, Land Title | 1 Comment »