The question has always been asked by the buyer when buying a house in Malaysia, should I buy "Leasehold or Freehold?". This is a really important factor that needs to be considered when buying a house in Malaysia.
But first and foremost, what is a freehold property? and what is leasehold property?
Freehold Property
A freehold property is a property with non-control from the government or local government and it is entirely owned by the owner. It is undeniable that freehold properties are always valuable compared to leasehold properties.
Advantages of Freehold Property
The owner of the freehold property owns the land when the property is built on.
Usually, freehold property has a higher appreciation value than the leasehold property.
The buying and selling process of a freehold property is straightforward. Generally, it takes a short time to complete when compared to leasehold property.
Disadvantages of Freehold Property
Freehold properties are often more expensive and require higher down-payment than leasehold property, hence, you need to increase your budget when you consider buying a freehold property.
Lower rental yields require higher entry costs.
Leasehold Property
A leasehold property is a property owned by the government, and it only can belong to the owner for 30, 60, 99 or 999 years. Once the leasehold period expired, then the ownership of the property will return to the State government or authority unless it has been renewed before the expiration.
Advantages of Leasehold Property
Leasehold properties' prices are 20% lower or more when compared to freehold properties.
For investment purposes, leasehold property is more valuable as it has lower entry costs and higher rental yield.
Disadvantages of Leasehold Property
The process of buying and selling leasehold property takes a longer time when compared to freehold property because of the restriction, such as state consent and the time for approval is needed.
Difficult to get a bank loan, depending on how many leases are left.
In conclusion, the advantages for the freehold property turns out to be the disadvantages for the leasehold and vice versa.
However, the property’s land tenure should not be your biggest factor during the property buying process. When planning to purchase your first home, the first thing to be considered is your objective (own stay or investment purpose) and housing affordability. Some of your considerations may include the price of the property that you can afford to buy, available cash in hand, and how much money you can borrow from the bank.
So, are you interested to buy a house or plan to invest property in Malaysia? Click here to learn more.
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