From K, a viewer who wrote in by email
K and their girlfriend are from Penang, work in Selangor and earn RM15,000 a month between them, with only a RM700 car loan. They rent for RM1,280 a month and love a leasehold condo in Damansara Damai, built in 2006, for its space, quiet and reasonable price. They may move back to Penang or upgrade around 2036, when the lease would have roughly 60 to 70 years left.
Will a condo with 60 to 70 years left on its lease be hard to sell, even at the price they paid?
“My concern is you buying with her as boyfriend, girlfriend.”
The lease isn't the real risk. If the rent covers the instalment, they can always rent the unit out and wait, so they can buy if they like it. What worries Sean is buying jointly without an agreement.
Why
Lease renewals can lift prices
Sean cites a Penang condo near Queensbay whose lease, with 30-odd years left, was renewed to 99 years for a fee of about RM1,000 to RM2,000 per owner; a local property expert told him prices nearly doubled. He sees little reason for a state to refuse to renew land under people's homes.
Freehold isn't absolute either
The government can compulsorily acquire any land, freehold included, for public works, and pays compensation based on market value. Freehold is now rare enough to sell at a premium, and this condo is reasonably priced partly because it is leasehold.
The real exit risk is financing
Once around 60 years are left, Sean says banks may not lend to the next buyer, which shrinks the pool you can sell to. That is why the rental market matters more than the title.
Here the rent covers the loan
Four-bedroom units were listed at about RM450,000 to RM460,000. A RM400,000 loan over 35 years at 4% costs about RM1,800 a month, and similar units rent for around RM2,000. If they need to leave, they can rent it out rather than sell.
What to do
- Check the rent for the same unit type: if it covers the instalment, your exit is settled even if selling becomes hard.
- If you will need the sale money to upgrade, plan to sell sooner, around ten years in, rather than waiting until the lease is shorter.
- If you buy as an unmarried couple, agree in writing first who can cash out and whether a buy-over is at market or SPA price.
- Consider buying in one name: each of you keeps two 90% loan slots, while a joint purchase leaves you three between you.
- Visit a few units before committing.
Editorial Note: Summarised from Sean Tan's full episode. The quoted answer is in his own words; the rest is our paraphrase. Figures reflect the recording date, so check current rates and rules before acting on them.
ASKING SEAN #234 | LEASE EXTENDED, PRICE DOUBLED
Sources & Verification Data
Summarised from Sean's full English captions for Asking Sean #234. The quoted answer is verbatim; everything else is paraphrased. Prices and rents are as Sean checked them in December 2023. Parts of the automatic captions are unclear, so only clearly stated figures are included.
