FREEHOLD Property
Freehold properties have always been the preferred one as it is perceived permanence in the title. Freehold property is when the state sets aside a plot of land and disposes it indefinitely to an individual. This is seen when the developer build freehold bungalows, private housing and condominiums.
Freehold landed-properties vs Freehold high-rise properties
When developer owns the land, properties built on it are transferred to the buyers provided it is a landed residential property such as a bungalow or a terraced house. This ownership will be in the form of Master Title. However, for condominium or other high-rise residential properties, the buyer owns a stake in the condo (based on the units) but the developer still owns the land. In this case, the developer will distribute the ownership via Strata Title.
Ps. If u getting a high-rise building such as Condominium, you can consider get a leasehold, it would be less different in long term of view. Certain leasehold properties in market acquired strategic location, lower price than freehold and other positive factors.
Freehold land definitely has a fair bit of advantages. As such, owners face fewer and less stringent restrictions when they want to transfer their land to someone else. Besides that, they also have the right to subdivide and allocate the land, although it is still subject to town planning controls. Even though there isn’t any development taking place on a freehold land, the state still cannot claim the land from the owner, which means owners are not forced to stick to a deadline. Apart from that, the land also goes through stable growth provided the property as a whole is in a good condition. If there’s a chance for redevelopment of old freehold properties, the owners will still be compensated.
But attention !!! Under the Land Acquisition Act 1960, the state can take back freehold land if it is for public purposes such as an MRT project or economic development.
Exception
Certain freehold properties will require the consent of the state when transferring ownership. Therefore, it’s advisable for potential buyers to look at the title of the property to find out if there are any restrictions on the land before purchasing it.But attention !!! Under the Land Acquisition Act 1960, the state can take back freehold land if it is for public purposes such as an MRT project or economic development.
LEASEHOLD Property
Leasehold is the least preferred land title in the market last time. Since more people know about differences of freehold and leasehold properties, more people accept to purchase a leasehold especially the younger generations. The properties on leasehold land typically come with a lease of 30, 60, 99, or in some cases, 999 years, mostly new development properties provide 99years tenure. Such land comes with some restrictions and they are written down in the lease. The tenant is required to care for the land as defined by the land legislation. If the state deems the tenant unfit, the security of the tenure can be compromised and the state can also forfeit the lease for non-performance.
As for the restrictions, here are a few that’s worth mentioning:
1. It takes longer to sell
During the period of ownership, only the state or an equivalent can grant approval for a transfer of the lease. The sale for a leasehold property takes roughly 3 months and it only starts after the state has given its consent, which can take more than 6months. This means that reselling your property can be a problem in the future.2. Value can be lower than freehold
When we speak of the value, experts say that properties with a 99-year lease go up at a similar rate with its freehold counterparts during the first 20 to 30 years. In some cases, leasehold properties do gain more value than freehold ones during the early years. However, beyond 30 years, the value stagnates and depreciates until the expiry of the lease.
Ps. A property investment tips** If you take for investment, sell your property within the "golden 10 years" counting from VP (while the time you get key from developer) to maximize your profit with the highest market value. As property price will show upward trend in first 10 years due to market demand, but after 10 years its price would stabled or less increment due to more competitive of new properties buildings nearby)
3. Financing might be more difficult to obtain
Another problem one might face is with financing. Financial institutions tend to be reluctant to lend to those wanting to acquire leasehold properties with less than 50 years remaining on the lease. Most banks will pick to borrow money to leasehold properties with at least 75 years left on the lease. Even if you get your financing approved, your loan amount will most likely be lower than the maximum 90%, which means you have to fork out the remaining amount by yourself.
Ps. If you buy a leasehold for own stay, it isn't a huge problem. If you are first hand or second hand buyers will has less concern about this as the loan maximum tenure would be 35 years only, so loan margin will still stick to normal ratio.
4. The price value is lower than freehold
Price-wise, leasehold property may or may not be cheaper than a freehold of similar specifications. Assuming all the details of the properties are equal, like built-up area of the building and the land size, the price of a leasehold property if often 20% lower than a freehold one.
Ps. In another point of view.. If you take for own stay, lower price range of leasehold is a benefit to grab a "sweet home" as cheaper price u spend on home purchase and matter of property transfer time isn't in your concern. Whereas, if you take for investment, lower price value to buy in a leasehold properties with strategic location, spacious layout/size, good accessibility and trustworthy developer etc, the greater chance you can get maximized profit from sell out price (compared to a freehold).
Well, hope these information would help you all on your purchase decision while concerning freehold and leasehold factor.
***Subject to change. The post involved personal opinions, just take as reference.
