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Should I buy freehold or leasehold properties?



Oftentimes, I am asked by many prospective buyers the same question: whether it is better to buy freehold or leasehold properties. To the bankers, they always prefer freehold because it is easier to process their loan compared to a loan for a leasehold property. In Malaysia , there are many types of leasehold properties eg. leasehold for 30 years, 60 years, 99 years and even leasehold 999 years in Sabah. Any property with a remaining lease of less than 30 years will not be able to get any banking facilities.

To buy freehold or leasehold property depends on the requirement of each individual, especially on commercial properties. To international fast food companies or franchise-oriented businesses like McDonald's, Kentucky Fried Chicken or 7-11, they spend millions of dollars to conduct surveys on the traffic flow as well as to determine the most strategic location suited for their business. To them, location is the key factor in selecting their outlets. The tenure is not a major factor.

Lately, a market survey indicated that the market values for properties in DeStrand, Sunway Damansara and Kota Damansara township went up by about 15%-20% within 2 years although these are leasehold properties. However, many considered it a good choice to invest here because of branding and location.

In China , most commercial and industrial properties are only given a 50-year lease. However, China is still attracting a lot of foreign investors pumping in billions of dollars for their business expansion. This is the new trend and new market outlook. Thus, the question of freehold or leasehold is no longer as pertinent as in the past, as other factors such as location, branding and development concepts play equal roles as decision factors.

 

 

 

 

This article was written by : Dr.Wong Chee Yong PJK, Poly Properties


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