With the ever growing population which resulted in the rampant property development, the number of freehold land are slowly diminishing in numbers hence opening more roads for leasehold properties. However, there is still a dilemma going around for many property buyers to incline more on freehold land as it offers better edge in terms of value, long term prospects and rental returns. Is this really the case? We will have a brief comparison in the next section for a more holistic outlook to understand and hopefully to be able to gauge better property investment decisions moving forward.
“The property and the land is owned indefinitely by the buyer”
When a plot of land is set aside to an individual for an undefined amount of time, that plot of land is called a freehold land.
In this case, the land is solely owned by the individual for as long as the land is not sold to other parties – you can say that it is forever owned by those who bought freehold land.
“The property is owned by the buyer but not the land”
When a plot of land is set aside to an individual for a defined amount of time, on average maximum 99 years of tenure and possibly lower, that plot of land is called a leasehold land.
Below are the major differences in detail for ease of understanding:
|Property value||On average, steady appreciation over the long run in years||There are leasehold properties that have higher capital growth in the first 30 years. However, going beyong 30 years the value might stagnate. The value increment might increase again after renewal of the leasehold was made|
|Ease of selling||Transaction is much simpler and would take up average 4 months. However, during COVID-19 the process might take longer||On average leasehold properties would take up of 6 months – 1 year|
|Ease of financing||Banks do not have preference on this factor. Banks will mainly refer to borrower’s financial health.||Banks do not have preference on this factor. Banks will mainly refer to borrower’s financial health.|
Have a brief read on 5 Traits of a good property to invest and get good rental for clearer picture of property investing.
Hope this help you guys to invest better in properties with more awareness and knowledge! 🙂