Is a leasehold ever a good idea?

I just read a book about buying flats and from what I can see a leasehold is rubbish! When would I ever want one? And why, oh why, is Britain the only nation in Europe which seems to have such a backward, feudal system as leasehold!!

Having just come back from viewing two flats today...I can agree partially.  Leaseholds are a complicated system, that doesn't make much sense to me, but at the same time, I can't see what the real detriment is. For instance, one of the flats we saw today had a 50 quid a year ground rent.   Ummm...can't see the harm in that.  I  could spend that much by accident when out shopping or in a pub. 

Ok, yes, theoretically the freeholder could raise that suddenly, but why would they??

I guess I have just accepted it as part of the London (and probably greater UK) real estate market.  So whilst I don't necessarily understand it, it doesn't put me off buying.

It's just that I read about a retired doctor in her 70s whose leasehold had 16 years left on it. She applied to have it extended by 90 years and was told it would be £700,000. It could have seen her out, but she wanted a legacy for her heirs. Why buy the place if you just have to buy it all over again after it's paid off, is all I'm saying. I don't live in London, so I'm not that desperate for a property. I'm just floored by the whole concept of leasehold. 'They' are trying to get the law changed to commonhold but it is slow going.

I recommend the book that I just read: How to Buy a Flat.

I never understood the concept of lease-hold. Well not from the home owners point of view.
I would never buy a house on a lease-hold

I presume one buys the bricks and mortar but someone else owns the dirt. What happens to the bricks and mortar at the end of a lease? Can the dirt owner demolish it? Do they aquire ownership of the bricks and mortar?

The whole idea just seems very archaic and completely baffling. 

I presume one buys the bricks and mortar but someone else owns the dirt.

Isn't that a bit like owning a condo?

Isn't that a bit like owning a condo?

Dunno...I thought condos owners collectively owned the land but I really have no idea.

My dh thinks it has all the disadvantages of buying and the disadvantages of owning.  You need to do all the repairs, but you don't own it in the end.  Just blah.

one of the flats we saw today had a 50 quid a year ground rent.   Ummm...can't see the harm in that. 

The ground rent isn't the problem here.  You are still basically just renting the entire property -- both land and building.  It just happens to be a very long-term rental which you can sell on to somebody else for whatever period remains. 

It's then something of a gamble as to how much increased real-estate prices in general outstrip the lower value of the leasehold property because it now has, say, only 55 years left on the lease against the 65 when you moved in.

So are we in general agreement that a leasehold is almost never a good idea?

It seems pointless to me.

It's not ideal but in high price areas it's a better option than renting for some people. I have a friend who bought a small house on leasehold in Hackney, it was the only way she could afford to buy in London. That's not to say it's not without problems.

We are looking to complete on a property in November and we both really wanted a freehold but given the area and house prices we decided that since the property is a new build and there are 125 years on the ground rent that we would still be ok when it came time to sell.  And with this overwhelming boom in development companies building new flat/apartment buildings it's getting harder to find houses within our price range. I understand the need to build homes for people but sometimes I think it's being overdone by trying to cram as many homes into one area as possible.  We looked at properties that had 85 years left on the leasehold but we just couldn't bring ourselves to spend that much money on property that needed a lot of work just because it was a house and a freehold.  It is our plan just to get ourselves on the property ladder this way and hopefully be able to upgrade down the road.

That's a thought, whisper.

On the other hand, when I moved into this flat 5 years ago, its asking price was £99,500. It's still £99,500. So it hasn't gone up in value at all, apparently. Meanwhile, the houses on this same development were £139,000 when I moved in here and now are going for £165,000. Granted, that's just my observation of this one development, but it doesn't seem to bode well for flat purchasing.

I don't want to be a homeless old lady because I spent my 40s wondering what to do. On the other hand, I don't want to hand over a full month's paycheque on a mortgage payment every month, either. So a house is pretty much out.

Gah!!

Interestingly, Leaseholds exist in the US but are called Ground Rents.  they only occur in Maryland and Pennsylvania:  http://en.wikipedia.org/wiki/Ground_rent.  It looks like the MD gov't is looking to overturn it, I seem to recall reading articles in the Baltimore Sun to abolish it as it seems unfair to the ground renters.

On the other hand, when I moved into this flat 5 years ago, its asking price was £99,500. It's still £99,500. So it hasn't gone up in value at all, apparently. Meanwhile, the houses on this same development were £139,000 when I moved in here and now are going for £165,000. Granted, that's just my observation of this one development, but it doesn't seem to bode well for flat purchasing.
Gah!!

I think you have to do some investigating into the area as well.  The flat we live in now was only built 4 years ago.  Our flat was about £154,000 when our landlord purchased it.  The ones exactly like ours in the next section over are selling for £176,000.  Our next door neighbor has put his up on the market at £199,000. How he will get that we never know!  Everyone thinks he is out of his mind if he thinks he can get that out it.  I think the area, how old the area is, and what kind of people are attracted to the area are something to take into account as well.  But with the recent stock market tumble and the affects on mortgages I personally think there is a potential at the moment to not make much of a profit on a place.  But that is why we plan to stay there for a few years.