Leasehold VS Freehold: Which is the better choice?

August 19, 2022

Leasehold or freehold? As we venture into the adult world, we are told countless times by family, co-workers and strangers that buying a new house is a lifetime commitment. Yes, an important and daunting decision to make – besides marriage, having children, and whatever is essential on your bucket list.

But when we live in a world with so much information at our fingertips,  confusion rises evermore. So which one do we choose – leasehold or freehold?

What is Freehold? What is Leasehold?

In Malaysia, freehold tenure is the right to property ownership until the end. You could pass on the property to your children or anyone else after your death and pass it on to their children, then their children, followed by their children or whoever they choose…until the end of time.

As for leasehold, you are not the owner of any property or land. You are merely leasing it for an amount of time, which could also be less if you buy a pre-owned property.

When you reach the end of the tenure, an application to extend the lease will have to be submitted to the state government, where if approved, you will have to pay a fee.

Freehold or Leasehold, which is better?

What advantages of owning freehold property?

  • There’s no specific timeline required when developing a freehold land.
  • Fewer limitations on transferring their land.
  • The state’s consent is required when transferring ownership for properties converted from leasehold to freehold properties. 
  • Owners have the right to subdivide and allocate the property – subject to town planning controls.

What advantages of owning leasehold property?

  • It would be priced slightly cheaper, thus making investments more value for money given the lower entry cost and higher rental yields.
  • Due to its tenure, leasehold properties are more attractive and equipped with facilities and features.

Disadvantages of owning a freehold property?

  • They are more expensive than leasehold properties.
  • Freehold properties have lower rental yields due to higher entry points.
  • The landlord is responsible for all repairs, refurbishment and maintenance required for the property.

Disadvantages of owning a leasehold property?

  • Leasehold property has a specific timeline (30, 60, 99 or 999 years).
  • Land legislation and environmental and urban planning controls restrict the use of the land lease.
  • Owners will be more responsible for looking after leasehold land or property defined in land legislation.

Ladies and gentlemen, the verdict is…

Deciding a lifetime between owning a leasehold and freehold property does not solely depend on the price and cost –  despite your search to buy the perfect home for sale in the heart of Malaysia, whether it be Selangor or Kuala Lumpur.

It depends on individual buyers on whether it is worth compromising on freehold status for other factors like affordability and location or looking forward to a leasehold with more attractive and equipped with facilities and features.

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