Have you heard that freehold property is more worthy? That it is forever yours once purchased?
There are many assumptions about leasehold and freehold properties, and not all of them are entirely true. Right here, we will go through some of the facts that might or not be entirely true!
Owning a freehold property forever
No freehold is a guaranteed of ownership forever. Even though perpetual ownership is entitled to freehold property owners, the fact stands that all freehold lands are subject to the government’s rights to acquire them if necessary due to the Land Acquisition Act 1960.
If the government plans to build an MRT project right where you are standing, you will have to give them your house. You will then be compensated for the amount of the market value of the property.
Freehold properties are higher in value
This is not entirely the case. When it comes to comparing, other factors will need to be taken into accounts such as property type, location, built-up area, or supply and demand.
Some freehold properties may be cheaper than leasehold. If both properties are identical except one is freehold and the other leasehold, this is when leasehold will be more cost worthy as it is priced lower than a freehold. Moreover, if the demand is higher, the leasehold value will be higher.
Therefore, it is entirely dependent on the situation.
Financing for freehold property is easier to obtain
This is true as banks are less likely to finance a buyer of leasehold properties and more so if there are only a few years left to their tenure. However, there is still a chance to secure a bank loan, though the amount will be lower than the maximum 90% margin.
Freehold property enjoys better appreciation over time
The fact stands that freehold property is appreciated and remains in value over a longer run than leasehold. This is due to leasehold being only appreciated at comparable rates in the being of 20 to 30 years of tenure. Afterward, the value will remain stagnant and then deteriorate once it reaches closer to the end of the tenure.
Therefore, freehold properties enjoy better appreciation over time.
Leasehold properties are harder to sell
Leasehold properties are harder to sell especially those which are older and nearer to the end of their tenure. This is due to the uncertainty of renewal of the lease which is entirely up to the local authorities. As such, there are fewer potential buyers which causes a harder time to sell a leasehold property.
There are many assumptions when it comes to which land is better. Before you make the decision to purchase a property, sift out fact from fiction to get the house that you really want.