Freehold and leasehold: Key differences
When you own a freehold property, you have full ownership of both the building and the land indefinitely, which provides long-term security and control. In contrast, a lease means that you own the property for a set period (e.g. 30, 50 or 99 years) while the land remains in the ownership of another person. At the end of the lease term, ownership usually reverts back to the landowner unless the agreement is renewed. Freehold ownership provides greater flexibility and long-term value, while leases may be more affordable but involve renewal risks and certain restrictions.
Ownership structures: Freehold or Leasehold
Different countries have different ownership structures. Understanding them is essential before making a purchase:
– Freehold Ownership: Full ownership of land and real estate (ideal for long-term investments).
– Leasehold Ownership (Leasehold Ownership): Ownership for a fixed term with an option to renew (common in Bali and Thailand).
Region-specific information
Phuket, Thailand
Foreigners may own condominiums on a freehold basis only if the total foreign ownership in the building does not exceed 49% of the units. Villas and land cannot be directly owned by foreigners on a freehold basis. Instead, foreigners can lease the land for up to 30 years with an option to renew. The cost of lease renewal depends on market conditions and agreements, but is typically 2-5% of the market value of the property at the time of renewal.
Bali, Indonesia
Freehold land ownership is limited to Indonesian citizens. Foreigners can only acquire leasehold rights for up to 25-30 years, with options to renew. Lease renewals often involve a renegotiation, and the prolongation cost can range from 5-10% of the property’s market value at the time of renewal, depending on demand and local regulations. Many lease agreements include pre-negotiated renewal terms to reduce uncertainty.
Georgia
Foreigners can own freehold property without significant restrictions, including both land and buildings. This open policy makes Georgia attractive to international buyers seeking straightforward, long-term ownership, with no lease restrictions.
Partner with experts: Work with the right professionals
Buying real estate overseas can be complicated. It is important to work with experienced professionals who understand the local market:
– Real estate agents: Find the right property and negotiate the best price.
– Legal advisors: Review contracts and ensure compliance with local regulations.
– Property management companies: Take care of rentals and maintenance, especially if you are not in the area.
Conclusion: Define your goals and choose wisely
The key to choosing the right property abroad is to define your goals from the outset. Whether you are investing in real estate to generate rental income, looking for a personal vacation spot, or planning a mixed strategy, understanding your priorities will help you make decisions. With the right strategy and expert support, buying real estate can be both a sound investment and a personal pleasure.