05| Property Showdown: Freehold vs. Leasehold - Which Reigns Supreme?

Developers are notorious for plastering the word "Freehold" in bold letters on their flashy banners and billboards. Let's face it, the allure of freehold property is hard to resist. Maybe it's because it's one of the first things we learn about real estate—buy freehold and you're set for life!

But hold on a second! With the crazy property development frenzy in the Klang Valley, most new projects are leasehold properties. So, it's high time we delve into the differences between freehold and leasehold, weighing their pros and cons like seasoned property connoisseurs.

Let's start with Freehold, shall we? In simple terms, it means we have ownership rights until the end of time. We can pass it down as a legacy or sell it to anyone willing, without jumping through any consent hoops. However, keep in mind that if the government needs our land for public projects like MRTs or highways, they can acquire it, compensating us properly, of course.

Now, what about Leasehold? It's like leasing a property from the government for a specific period, typically 30, 60, 99, or 999 years. Once the lease expires, we have the option to renew it or watch it slip back into the hands of the state government. Oh, and don't forget, we need to obtain consent from the local authorities when selling to eager buyers.

Now, the big question: Is freehold really better than leasehold? Let's look at it from different angles and have some fun:

#1. Is freehold property more valuable than leasehold property?

Property valuation is a complex game, and land tenure is just one factor. Not all leasehold properties are inferior to freehold ones. However, if two properties—one leasehold, the other freehold—tick all the boxes in terms of property type, size, and whatnot, the freehold property tends to appreciate more in the long run. Leasehold properties may start off with similar prices or slightly lower, but as the lease period dwindles, so does their value. The uncertainty around lease renewal dampens their appeal.

#2. Is it easier to get a mortgage for freehold property?

Banks mainly consider the property value and the borrower's financial health when approving mortgages. The land tenure, whether freehold or leasehold, doesn't have a significant impact. However, banks do take into account the remaining tenure of leasehold properties. They want to make sure it's long enough to cover the loan repayment period. So, before committing to a leasehold purchase, consider the remaining tenure and renewal possibilities.

#3. Are leasehold properties harder to sell?

It's a mixed bag. Many factors affect property marketability, with demand and supply playing crucial roles. In the fast-paced Klang Valley, freehold properties are becoming scarce, making most homebuyers less concerned about tenure. They care more about price, condition, and personal preferences. However, when time becomes a factor, leasehold transactions can take longer due to state consent and approval. In the Klang Valley, completing a leasehold transaction can stretch to 4 to 6 months after signing the Sales and Purchase Agreement (SPA). On the other hand, freehold transactions are smoother and more straightforward, with buyers settling the payment within 3 months, extendable by 1 month with interest.

All in all, freehold properties do have some unfair advantages over leasehold ones, hence their higher price tags. But as property prices skyrocket, affordability takes center stage for buyers. The freehold vs. leasehold debate becomes increasingly irrelevant, turning into a side note in the grand scheme of homebuying.