“Freehold property is always better than leasehold” when it comes to buying a property – does this still hold true, or has the answer changed in the last decade?
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But first, what is a freehold property in the Malaysian context? According to Act 56, Malaysia National Land Code 1965, freehold is a “land held in perpetuity” without expiry date. PropertyGuru describes it as land belonging “entirely to the owner with no control from the government.”
As for leasehold, the land remains owned by the State and only disposed of for a certain period of time not exceeding 999 years, usually with a period of renewal of up to 99 years. The owner of a leasehold property will have to apply for an extension before the lease expires, granted in exchange for a premium payable based on market value.
While it has been argued that people are now more accepting of leasehold property, this is a case of necessity rather than desire, what with the overall effects of economic downturn and more recently, the Covid-19 pandemic, as potential barriers.
What makes a leasehold property attractive?
Supply and demand:
The reality is that there are lesser and lesser freehold properties year on year, especially if one looks closer to the heart of the city. Naturally, your options are more limited when it comes to freehold properties.
More facilities and amenities:
To compensate for the lower overall value of a leasehold property, many real estate developers aim to offset this with more attractive facilities and amenities for the buyer.
Lower pricing and shrinking budgets:
Due to its limited tenure, leasehold properties tend to be priced lower, which is ideal for first-time buyers and overall shrinking budgets for property investment in general. To accommodate affordability, this often means seeking out properties in a further location if it’s freehold, or compromising for a leasehold property closer to urban areas.
However, in 2019 when StarProperty conducted a poll, 78% of aspiring homebuyers surveyed said they would nevertheless prefer buying freehold property.
As Datuk Paul Khong, group managing director and head of Savills Malaysia observed, this is especially so in cases where the homebuyer is no longer a first-time property owner, and are working professionals who have a family, or those who looking towards retirement. This tends to push them in the direction of real estate investment for longevity and legacy, but also towards luxury residences, or ones with all the conveniences and accessibility of a good location.
Why else is freehold property still the preferred investment choice?
While a leasehold buy will largely increase in value in the first 20 to 30 years in a similar vein as a freehold purchase, the latter will have a greater appreciation in value in the long run, while a leasehold property with a short tenure left will even depreciate in value and price.
Moreover, yes, whilst the Malaysian government can still re-claim freehold land if it comes in the way of public purposes such as economic development, the owner of a freehold land will be compensated based on its current market price, which is generally higher than that of a leasehold property. The likelihood of this happening – based on past experiences – is also quite low.
Ease of Financing
From a banking or financing perspective, there is an advantage for freehold in that lenders will take into account the remaining tenure left on a leasehold property when calculating loan repayment period. So freehold property buyers tend to find it easier to secure a maximum margin loan of up to 90%.
Ease of buying and selling
Any sale and/or transaction to a third party for a freehold property generally takes 3+1 months to complete, and is a more straightforward transaction compared to the leasehold transfer, which needs a longer time for state consent and approval, especially if it’s a second-hand transfer. For KL and Selangor, properties, this may take up to a year or more.
Higher demand and lasting appeal
As land becomes an increasingly scarce resource, particularly in developed cities such as Kuala Lumpur, a freehold property will only become more and more sought after. What more in a prime location such as the KL City Centre area, where KSK Land’s 8 Conlay project is situated, there is but a handful of new freehold projects emerging yearly.
Coupled with the fact that a Golden Triangle property such as 8 Conlay offers all the accessibility that city living can bring – from an upcoming MRT station 400 metres away, to the Bukit Bintang just district across the road; The Royal Selangor Golf Club; Prince Court Medical Centre, and many more – all without needing to sacrifice long-lasting value in your property.
Plus, any luxury freehold property worth its salt will not compromise on offering the best amenities and services for the homeowner’s wellbeing. At 8 Conlay’s YOO8 serviced by Kempinski, it carries the substance of a branded residence proudly, from a 1-acre green space up in the sky, to a game-changing water lounge, not to mention what sets it all apart – five-star hotel-led services by Europe’s oldest luxury hotel group, Kempinski.
If you’re looking to invest in the best of freehold properties in the heart of Kuala Lumpur City Centre, 8 Conlay is set to house the first YOO-designed twin branded residence in Malaysia, YOO8 serviced by Kempinski, with interiors designed by award-winning global stars Kelly Hoppen and Steve Leung. To find out more, contact us here.