Should you be worried about the ‘hold’ you have on your property?

When buying property, some people may be quite particular about whether it is leasehold or freehold, especially when it is landed property.

The land laws of Malaysia are governed by the National Land Code 1965. Freehold property is land is disposed off by the state authority to an individual in perpetuity for an indefinite period, which means that the property belongs to the person who has bought it.

Leasehold property, on the other hand, is land disposed of by the state authority to an individual for a term not exceeding 99 years, and upon expiry of tenure, the lease can be renewed or the property reverted to the state.

Basically, the only difference between freehold and leasehold is the ownership, in which the former grants ownership of the land and structure(s) built on it forever, whereas the latter is tenure provided by the government for a duration of 30, 60, or 99 years.

It is generally assumed that freehold properties have better value than leasehold properties, although location also plays an important part in determining a property’s value. For example, a leasehold single-storey terrace house in Bandar Utama will have better market value than a semi-d in Kajang. The main reason freehold property is more expensive is because its appreciation value is stable, while leasehold property tends to appreciate for the first 30 years, and then plateau or decline as it nears expiry.

However, if you are a first-time buyer with plans to ‘upgrade’ to a bigger home in the next 10 or 20 years, you don’t really have to worry about the leasehold status of your property. At most, you will just have to renew the lease. Instead, you should be more concerned about the infrastructure of your house, as most houses are built to only last about a generation or two (50-60 years) before needing major renovation works.

National House Buyers Association Malaysia (HBA)
The Malaysian Bar 
Penang Property Talk