The Land Laws of Malaysia is governed by the National Land Code, 1965 (Act 56 of 1965). Section 40 of the National Land Code, 1965 states that all state land belongs to the State Authority. When state land is disposed off by the State Authority to an individual in perpetuity for an indefinite period, this land is now granted as Freehold title. When the state land is disposed off by the State Authority to an individual for a term of years, by virtual of law, not exceeding 99 years, this land is now granted as Leasehold title. Upon expiry of the period of the lease, the land should be reverted to the State Authority.
Theoretically, comparing to the leasehold title (within 3 to 99 years) with land tenure for a fixed term of years the market value of land under freehold title would definitely having a better market value and in demands, apart from it's locality. The price of land held under leasehold title will be affected seriously when the lease term is going to be expired. Referring to the attached chart, assuming an apartment receives a net rental of RM1000 per month and if we were to capitalise it at 8% over the period of tenure, the values drop as the tenure decreases, with the major changing point being the tenure having 40 years left.
For example, properties in Section 1 in Petaling Jaya. The properties in average have about 20 - 30 years left in the lease and residential land values are averaging at RM28-RM30psf. Though the prices are about similar to what it was 10 – 15 years ago, it takes longer to find buyers, with the market being very limited to existing residents. In contrast, Section 5 in Petaling Jaya, which properties have a longer lease tenure left of 55 – 70 years left, has seen considerable appreciation of about 30% - 40% in the last 10 to 15 years, even though the lease tenures have been reducing. This appreciation is comparable to those of freehold nature.
Notwithstanding the above, in the Klang Valley property market, the location and for the newer developments, the concept, is still seen as more important. We have listed some of the locations and developments that defy the perceived risk associated with leasehold properties and are runaway success, with potential investors placing importance in location, concepts, developer and of course potential for growth. (Values provided by Zerin Properties in collaboration with KS Dhillon Property Consultants)
Tropicana Golf and Country Resort. Located by the NKVE and now getting more accessible with the Kota Damansara infrastructure, Tropicana has really matured into a successful and popular choice for the elite build their dream home. The concept of living within a secured and gated Golf Resort with club facilities and so very accessible to the urban areas and the highways has made Tropicana a winner. Bungalow land in this development have reached a high of RM110-RM130 psf whilst some Semi Detached houses have reached RM1.1 Million. Price of Bungalow's range of course, depending on the size of the land, the building and the quality of the product.
Petaling Jaya especially Section 5, 6, 7,9,11,12, 14, 16, 17. The location is the main seller for these choice locations in Petaling Jaya. Being an older location in the Klang Valley, a lot of the neighborhoods are really nice and mature with some really quaint houses offering tremendous potential. Moreover, amenities are a plenty in these locations making them even more attractive to potential purchasers. The prices for land vary from RM70 to RM90 psf for 55 to 70 years not expired on the lease. Double storey terraced houses in Section 17 go for about RM300,000 to RM330,000.
Please note however, in Section 17 and Section 5, there are pockets of freehold properties. One must also be aware that there are some micro locations within the above locations that may fetch higher values.
Desa Seputeh. Leasehold or not, this Seputih location is doing well with its close proximity to amenities and all the highways and byways. The pricing range is around RM400,000 to RM450,000 for a basic house, which is very good comparing to its freehold brothers in Bandar Utama.
Taman Bukit Desa. There are some pockets of leasehold double storey terraces here and prices are as healthy as Desa Seputeh. Again, its proximity to amenities and also its easy access to all parts of the Klang Valley makes it a very attractive alternative.
Taman Titiwangsa. A gem of a location, just at the periphery of Kuala Lumpur City and close proximity to a beautiful park and also a golf course. Vacant Bungalow land here go for about RM80 psf for properties that have not expired term of about 70 – 80 years. For comparison purposes, freehold land at Country Heights is going for RM45-RM55 psf and at Gita Bayu, for about RM60-RM70 psf.
Bandar Sunway. As the adage goes, a good developer and concept does make a difference. This township was created from a wasteland to what it is today, a true lifestyle location. Though traffic is always an issue here, its still very hot with basic Double Storey Terrace houses reaching a high of RM330,000 in PJS 9. This figures are comparable to freehold properties in Sri Damansara.
Sunway Damansara. A relatively new development in the PJ Utara locality. It Is Strategically Located On The Northern Side Of Damansara Indah Resort Homes And Tropicana Golf And Country Resort, with Direct Access To The New Klang Valley Expressway (NKVE) And Lebuhraya Damansara-Puchong (LDP). The double storey terrace houses are still selling at RM400,000 – RM450,000 with the Semi Detaches touching a high of RM950,000. Again, a good developer with a good concept and also a hot location for the future makes the difference.
In short, the tenure is indeed important in choosing a property. However, it is not the only determinant and it will have to be seen holistically together with the location, reputation of the developer, concept and potential for growth of that locality to ensure that your property investment is truly an appreciating asset.