Leasehold is a concept familiar to many people, but whose implications are often less well understood. Especially in cities like Amsterdam, ground lease is an important factor that can affect property values. But what exactly does it mean for the value of your property if it is on leasehold land? In this article, we dive deeper into this question and look at the different ways in which ground lease can affect the value of your property.
The basic principle of leasehold
Leasehold is a situation where you lease a piece of land from the owner, usually the municipality, and pay a fee on it, known as the "canon. You have the right to use the land, but are not the owner. This can affect the value of your property, which will usually be lower than if the land is wholly owned.
Canon: a recurring expense
The periodic canon is an important factor that can affect the value of your home. The higher the canon, the less attractive the property becomes to potential buyers, simply because the monthly charges are higher. This can lead to a lower sales price. Future canon revisions can also create financial uncertainty, which also has a value depressing effect.
Perpetual vs. perpetual ground lease
In Amsterdam, you can choose between perpetual and perpetual ground lease. With perpetual leasehold, you can buy off the canon in one lump sum forever or choose a fixed, never changing, amount. This provides financial security and can therefore increase the value of your home. With perpetual ground rent, there is more uncertainty about future costs, which can depress the value.
Location, location, location
The location of the leasehold land also plays a role. In popular areas, the land value, and thus the canon, can be high. However, the attractiveness of the location can compensate somewhat. If your home is in a less desirable location AND the canon is high, the value of your home will probably be more affected.
Termination and transfer options
In some cases, municipalities offer the option of switching from perpetual to perpetual ground lease or even buying the land. These are important considerations for potential buyers and can significantly affect the value of your home.
Clearly, ground lease is a complex factor that can affect the value of your home in multiple ways. Therefore, it is critical to be well informed and make informed choices. Whether you are a buyer or seller, understanding the ground lease situation and its financial consequences can significantly strengthen your position on the housing market.
