Freehold vs Leasehold
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.
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Comments
@ Damien
I believe condo owners have something called strata title. I’m not very sure in this. But from what i know, leasehold condo owner has this “land” in the air. 
Maybe that is why most condos are leasehold? Because ..well..no matter how good the management is, a condo cannot last 99 years =_= Same goes for linked house (or was it called town house?).
Freehold is easier to sell if it is landed but it is also easier to sell because the price is not as expensive due to its location.
By the way, places like Tropicana has around 40 years left before its renewal few years ago (if not wrong). And even before the renewal, the price is like > 800k to 1 mill. And a lot of people are still flocking over to get properties there. Same goes for the Bandar Utama incident where thousands of people queue up early in the morning to buy a leasehold landed property the price was like…700k?
well, condos don’t last 99 years but if it’s a good area, it might be redeveloped! This I think is especially true in KL, where the planning has been done very haphazardly! E.g. Selangor Turf Club was moved out and now the land became KLCC!
In S’pore where land is scarce, some 30-40 year old freehold condos e.g. in Farrer Park are sold for 1.5x the current market price to be knocked down and reconstructed! Or if you own a landed property in a planned area for a high-rise condo, you might get 6-10x what you paid for in the 1st place!
And as for leasehold, you’ll never know what the government plans are… E.g. recently in S’pore, an old couple who owns an Orchard Road terrace house with only 5 year lease left was trying to sell their house for 20k without any buyers! Ppl are afraid it’ll be earmarked for another mall or office building or high rise residential.
boringests last blog post..Truly Malaysian Design – The Teh Tarik Hook!
In Sg, the lack of land forces land recycling to be done at a faster rate so yeah, its already happening. The developer will offer a replacement unit or a unit of comparable value in some other area. MY still has plenty of land and it could be year 2090 before we see high-rise condos torn down and rebuilt. Its the uncertainty of the future that will affect resale value in my opinion, and this gives an edge to freehold.
@ boringest
The possibility of redevelopment is under the discretion of the state government, no? The question here is, even if your condo is a freehold property, what will happen if they plan to redevelop it? Will you still get back your land (or AIR for that matter) title?
Hmm…in KL, I think there are still few areas which can be “moved”. Oh, talking about Turf Club, I’ve heard of stories about KLCC at night. LOL. Guess horse racing here took a lot of victims last time?
Singapore’s land is quite scarce so anything freehold will definitely fetch a good price provided the location is not too bad. Well, even if it’s leasehold, the property price is still very good because…well…there’s only limited land left =_= unless, the lease is like the one the old couple has – 5 years. The gov might just let the lease expires and reclaim the land. Cheaper that way.
Conclusion, I think leasehold with > 40 years in a prime location can still fetch a pretty good price.
@ Damien
Well, you do have a point there. Maybe that’s why freehold properties in areas which are CLOSE to prime locations, are becoming ridiculously expensive?
But hm…I still cannot think of a condo being a freehold. The developer can just ignore your condo for good, without offering any redevelopment. But it’s hard to predict since we don’t have any real life example on such issues yet…and I don’t think I can live till 2090
I was told freehold properties are easier to sell because if the property has 40 years left and the buyer is only 25 yrs old, the buyer may be discouraged as renewal may be difficult process and not guaranteed. The peace of mind factor is not there.
I’ve got a question about freehold condos. If I’m not mistaken, most modern buildings are built to last 99 years. If the condo gets torn down after a hundred years, what would the owners be left with? Or would 200 people be claiming ownership over a 3-acre plot of land?
Landed property owners don’t have this problem because even if their house is flattened, they still have the land. More reason to buy landed property?