Leasehold Property
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In Asia, our home lands were mostly or even 100% leaseland so many buyers might not think it is a big deal when they look at leasehold property like those in UBC or Simon Fraser University area.
In Vancouver East, Vancouver West, North Vancouver, Downtown just to name a few areas, there are hundreds of leasehold condos, leasehold townhouses and detached houses. They are either owned by the city, the federal government, the UBC Properties Trust, the 1st Nations bands or private individuals. Leasehold ownership means the tenant owns the right to use the property for a given amount of time, which ranges from 30 to 99 years depending on the nature of the lease.
Price difference: The variance in price could range from 20-35%. .A $500,000 leasehold waterfront townhouse in westside would be worth $800,000 or more if it was freehold. A leasehold property definitely has great value when compare with the cost of renting. The price of entry is cheaper because you don’t own the land. You look at it like you’re renting an apartment.
Some areas you don't have a choice. For example, UBC, SFU, and the 1st nations projects at Raven Woods (NV). Here you buy the location because the land is not for sale, and there is not much available nearby that is Freehold that is newer. There are risks, such as if it’s not prepaid for the term, there are regular lease payments on top of mortgage payments. Those payments could come up for renewal that is based on a much higher market value than when the property was purchased. The other risk is that a leasehold property is marketable only when there’s lots of time left on the lease. As it gets closer to its renewal date, its value is certain to drop. Therefore, purchase leasehold property with many years left. The 1st nations land and private leases are more difficult to resell thus greater discounts here. Contrary to popular thinking, leaseholds do appreciate, but just not as much as a freehold. They appreciate because rents also escalate. When you buy leasehold property, you are buying the right to occupy that unit in today’s dollars which down the road will be more, because everything goes up after a while.
Lending institution has very different requirement granting loans to leasehold property. Therefore, if you consider purchase leasehold property, please make sure you talk to your banker before you make an offer to make sure you have no problem getting a mortgage.
Should you have any further question, please feel free to contact me at 604-412-5860 or visit my website at www.TinaMak.com or www.TinaMak.ca
