Leasehold and Freehold: Introduction & Differences

"Why would anyone buy leasehold?" "Can you buy freehold in Thailand?" "What's the difference between Leasehold and Freehold?"

Those looking to buy a condo unit, house, or plot of land may have heard "leasehold" and "freehold" in some capacity. Join us as PropertyScout demystifies the definition and the differences between these two terms.

What is Leasehold?

Leasehold is partial ownership for a certain period of time through renting or buying a property. This means the property would return to the freeholder (or landlord) upon expiry unless there is a renewal. This type of rental/buying is common for investors due to cheaper prices and lower costs. But, there may be risk of damage to the property in case of a disaster, or expropriation during your leasehold period. In that case, you will not get compensated by any means.

What is Freehold?

Freehold is permanent and complete ownership of land or property. This means you will have complete freedom regarding the renovation, decoration, and maintenance of your property or land as you would like. If there are damages caused by disasters or if your property gets expropriated at any point in time, you will get compensation in accordance with the title along with a 100% complete bank loan. Note that despite the high investment needed for the purchase, the freeholder is free to make profit off the property in various ways such as renting out, selling, or pass it over to their children as a heritage.

Leasehold vs Freehold: Which is more suitable?

The question of which is more appropriate for you really depends on what you want and your purpose of investment.

If you would like to make profit for an extensive period of time, freeholding might be a more appropriate choice. This is because the property will remain yours even for a number of years into the future due to complete ownership. Moreover, you are free to make profit off of your property through various methods such as selling it or renting it out. Most importantly, land prices have risen in the past few years, especially economic areas or urban areas such as Sathorn or Silom. Prices are sure to increase in years to come.

As for leasehold properties, this would be a suitable alternative for those with a lower budget and are looking for condos in the middle of the city or a plot of land for only a certain period of time and not planning to hand down to their children as a heritage or burden their children. Prices can also be paid by investment and are cheaper overall.

Pros & Cons: Leasehold

The positives of leasehold

• Cheaper than freehold: As stated before, leasehold properties cost less than freehold properties (30-40%, to be exact).
• (For Condos or houses) Most locations in the middle of the city are expensive: Located within a CBD (Central business district) in Bangkok such as Ratchadamri, Langsuan, or Yaowarat, for instance.
• Unlimited hold for foreigners
• Professional Service: No worries of damage to the property as the landlord will always take care of that on a regular basis.

The drawbacks of leasehold

• Incomplete ownership: You will only be able to rent, to which the leasehold period is 30 years. You will also not be compensated in case of damage to the property from an accident or expropriation of the property.
• You will no longer have the right to live in the property once the leasehold period expires.

Pros & Cons: Freehold

The positives of freehold

• Complete ownership: You are free to do maintenance work, renovate, or re-decorate as you would like thanks to the complete and permanent ownership, or you can keep it to pass it on to your children in the near future.
• The condo price is likely to increase as land prices rise in the future, granting you compensation from both the rental price and the capital gain. Alternatively, you can also get your money back through selling the property at any given point in time.
• A chance to get 100% loan from the bank: If there is any damage to the property caused by a disaster or if the property gets expropriated, the buyer will be granted compensation in relation to the title deed.

The drawbacks of freehold

• With freehold being complete purchase and ownership of the property, if the buyer purchases the property off of a developer who isn't very trusted, problems may arise in the future.
• Foreigners cannot own over 49% of the property.

Conclusion

Whether you are looking to purchase all the way with freehold or just through leasehold, if you made it this far into the article, we hope you are well-informed of the pros and cons of each type of purchase and its limitations. If you are going for a freehold, we hope you enjoy your fully-owned property and if you are going for just a leasehold, take note of the different limitations and you should be fine in a long run.

Got further questions? Contact us!

If you still have further questions or concerns on leasehold, freehold, or real estate in general, please don't hesitate to speak up and contact us. Our property consultant team will be very happy to help answer your questions.