GDP growth, deficits and A- ratings as per Fitch Ratings

Ringgit is weak. Singaporeans are enjoying themselves in Johor while Malaysians are feeling the pinch whenever we travel, well except if we travel to the UK for which Brexit has wrecked havoc. So, what’s really happening to the economic fundamentals? This is Fitch Ratings’s statement as reported in many major medias. “Malaysia is better placed than many net commodity exporters to cope with the lingering effects of the negative shift in its terms of trade.” Yes, this is also one of the international rating agency which is still rating Malaysia at A-(lowest investment grade). Malaysia has kept its ‘A-‘ rating, which has been on Stable Outlook since mid-2015. The following were also shared. In 2014, the revenue from oil (Petronas) was 30% of Malaysia’s total revenue. Any fall in oil price is thus a very big thing. By the end of 2016, oil revenue would only account for around 14.6% of total revenue.

With continuous economy diversification, expect this to fall further and yes, Malaysia is not going bankrupt anytime soon based on all the analyst reports whether internal or external. A fact which has already happened was that dividends from Petronas has fallen from RM29 billion in 2014 to just RM16 billion in 2016 and should only be RM13 billion in 2017. Since GDP growth is expected to be positive, the contribution from oil in percentage will likely be even lower in 2017. Who wants to bet one cup of kopi-O against me that it may even be possibly near 10 percent of GDP by end of 2017? Haha. I have confidence with our BNM governor too.

Fitch Ratings also sees the Malaysian Federal Government debt under 54% of gross domestic product (GDP) by year end as achievable. Bloomberg also reported recently that the recent weakness in Ringgit is not supported by fundamentals. On the fiscal deficit, Fitch said reasonably strong GDP growth has helped to stabilise Malaysia’s federal government deficit and debt levels. Good Services Tax (GST) introduced in April 2015 has also lent support to non-oil revenue. “Fitch expects the 2016 deficit to come in at 3.2% of GDP, but views the 2017 target as achievable.” The targeted deficit for 2017 is 3 percent while the government expects 2016 to end at 3.1 percent deficit. Happy following.

written on 25 Oct 2016

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Development charge to be charged from 2017 in Johor, probably.

Dear Johor developers, a development charge may be on its way. In accordance with the provisions of Section 32 of the Town and Country Planning Act 1976 (Act 172), the Johor government plans to impose a development charge on property projects carried out. This is already in the final stage of coordination, according to State Housing and Local Government Committee chairman Datuk Abd Latin Bandi. Of course, the ‘final stage’ here refers to before being presented to Mentri Besar Datuk Seri Mohamed Khaled Nordin.

The charge is to be levied on the applicant whose development project was approved for the conversion of land use, which changed the floor area, compactness and density, would raise its value. This development charge will provide provisions to improve infrastructure and public facilities in the area. He shared that this should be implemented next year but it will not have a give a big impact on the selling price of property units. What it is supposed to do however would be to benefit the local authorities, the developers, community and state.

Instead of speculating on when is the date for implementation, I would personally wish for more of these new improvements for the public to be spelt out well in advance. In writing, hopefully. I think Johoreans should get to know so that they too can provide some constructive comments. Whatever is good for the public should be quickly shared so that when it is completed, the public can have access to and benefit from it. I do think it will be implemented, just like the hotel levy in another state which I also support and have paid willingly. I hope it will be used wisely. Happy believing.

written on 24 Oct 2016

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Penang’s Design Village is opening extremely soon.

I was in Penang airport twice last week. One huge signboard was promoting the Design Village in Penang which will be open by the end of 2016. It said something along the lines of ‘clear our wardrobe’ since we will be shopping for lots of new clothes at the Penang Design Village. As reported in themalaymailonline, this will be Malaysia’s biggest outlet mall. What is an outlet mall? This is where you get those brands your colleague is carrying at a cheaper price, sometimes by far cheaper. Of course, expect it to be one or two seasons behind. As for the current ones, you can always visit the more luxurious malls, say Pavillion KL.

This coming Friday, since I am fetching my in-laws, I would also be dropping by the Mitsui Outlet Mall. Yes, I was in Johor Premium Outlet just one month ago. Oops, am I concluding that I am ‘cheap’ or just a shopaholic? It’s okay to be both. Haha. Coming back to the Design Village, it is located within the newly-developed township of Bandar Cassia in Batu Kawan. It is built a 24-acre tropical garden. Let’s hope it is more cooling while we shop at the largest Adidas outlet store in Malaysia. Besides that, there would also be new brands coming into the region such as the Travel For All Outlet store that will have luggage, travel accessories and winter wear, also at markdown prices.

design-village-mall-3An image of how it looks from Do expect lots of people as they could now buy, buy, buy within Northern Region instead of flying to KL or JB. I also checked, it’s less than 5 minutes after we exit the Penang second bridge. Beginning at the end of the first bridge however, it is around 20 minutes away. For those from Alor Setar, it’s 72 minutes away. All durations are as per Google Map. Time for SSS. (Shop, Shop and Shop). Welcome to Penang. Now there’s another attraction beyond the usual reasons.

written on 24 Oct 2016

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Franklin Templeton on Malaysia’s economy and deficit

This is what Franklin Templeton said about Malaysia, in summary. Who is Franklin Templeton? It is one of the world’s largest asset management groups (WIKI) or read about them here.

Malaysia has progressively narrowed its fiscal deficit, putting in painful measures such as the Goods & Services Tax (GST), reducing fuel subsidies and diversifying its economy. (Yes, if Malaysia’s revenues were solely dependent on oil, we might have gone bankrupt)

About the recent Budget 2017, its executive director/head of Malaysia fixed income and sukuk Hanifah Hashim said, “It is a fine balance to strike, but if it is well executed it can provide grease to the economic engine to generate economic activities and boost business confidence.”

About progress towards developed economy, Hanisah shared that since Malaysia has been diversifying its revenue, it continues to show its competitiveness among its emerging market peers. (In my personal view, we are definitely in the top tier of the emerging market peers. Yes, I am confident of my investments within Malaysia)

Other attributes include the fact that Malaysia is still continuing its trade surplus, GDP growth is likely to be 4 percent or higher. IMF projected it at 4.3% in 2016 and 4.7% in 2017. The government says its between 4 to 4.5 percent and Malaysia Institute of Economic Research (MIER) projected the GDP to be 4.2 percent. I could not find a single prediction of GDP Malaysia being negative, yet. BNM is expected to continue its accommodative stance and Franklin Templeton expected one more overnight policy rate cut. (Yes, this is the reason why US$ is rising in value versus Ringgit. The Fed is expected to INCREASE their rates… whatever)

By the way, if Malaysia’s economy is about to fail, it’s best not to touch any property. It is suicidal. If Malaysia’s economy is doing extremely well, we may not get the chance to buy at a good value. It may be a clever move to buy when it’s more neutral perhaps, when Malaysia is nowhere near bankruptcy and no one is queuing to buy in every property launch. (I have never queued then, now and in future. With so many new launches and transparency of information, let’s just buy objectively.)   Happy reading.written on 24 Oct 2016

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MRT and rental starts at the same time. Good.

One major reason why Hong Kong’s Mass Transit Railway (MTR) is profitable is because of a good business model; renting. They actually own the buildings on top of all the lines. A famous example, IFC Mall. To those who believe ticket price is enough to cover the expenses, it is not true.

Imagine we are the government of the day, who pays for the public transportation? Us, with taxes collected from the people. Is it really enough or do we still have to take loans to do it? Answer is we would need to get loans for it. How do we set the price for public transportation? As low as possible. Would we increase the price even as costs of maintenance and staffs continue to increase year after year? No. There would be huge complaints from the public anytime prices are adjusted upwards, never mind that the adjustments could never cover costs as shown by most of all mass rail transits all around the world, except Hong Kong perhaps. So, their model is really worth emulating.

We did not manage to do it with Monorail or LRT lines but MRT line 1 seems to have something similar. Of course, we are still very far away from how Hong Kong MTR is operating. They even do real estate developments! According to MRT Corp, it expects to earn an annual revenue of RM2.5 million at 19 elevated stations along the MRT Sungai Buloh-Kajang (SBK). Commercial and land management director Datuk Haris Fadzilah Hassan said, “The revenue will be on fixed rentals and not profit-sharing. Rentals vary from RM1,200 to RM3,500 for a 200 sq ft lot, based on stations locations and dependent on market rates in that area.” I hope Haris would also note that all these need to be adjusted on an ongoing basis in order to ensure MRT Corp benefits more and thus more money is made available to improve the services.

Haris also revealed that there would be at most three shoplots at each station – mainly convenience stores and prepacked food outlets as cooking is not allowed within the premises. “Contracts are for two years and renewable based on performance.” International retail brands include Watsons, 7-Eleven and Family Mart, while the local brands are namely, Noras Delight and Rotiboy. Yes, one of the stations that I will try would definitely be the Sungai Buloh MRT station. Will update after trying it, that’s for sure. Till then, happy following. MRT is exciting. 

written on 22 Oct 2016

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Budget 2017 – Property related highlights

More affordability for civil servants – Housing loan eligibility increased to between RM200,000 and RM750,000. (Current is between RM120,000 to RM600,000). In brief, the civil servants can buy more expensive homes? Hmm….

More availability for civil servants – 30,000 homes to be built under 1Malaysia Civil Servants Home costing between RM90,000 to RM300,000.

More availability of homes for B40 (Bottom 40%) – 5,000 homes to be built at prices between RM40,000 and RM50,000. RM20,000 will be paid by the government.

More availability under People’s Housing Programme – Another 11,250 homes to be built and prices between RM35,000 to RM42,000.

More RENTAL HOMES to be built in urban areas for rental for up to five years for new graduates or youths. As per reported, the number is 10,000 houses. Assuming each house can house 4, that’s good enough for 40,000 people.

pr1maVacant government lands will be made available and estimated new homes which can be built under PPR (Projek Perumahan Rakyat) would be 8,900 houses. (I would like to suggest they ensure it’s high rise so that it can benefit more people instead of very small landed homes)

1st home buyers get 100% stamp duty exemption on transfer and housing instruments. This helps toreduce house buying cost – limited to houses with value up to RM300k. Effective period – 1 Jan 2017 to 31 Dec 2018. (For first-time buyers, this should be another consideration as stamp duty itself is between 1 – 3 percent, depending on property price)

PR1MA home buyers get “end-financing” for their purchase. From 90% to 100%. In brief, there’s little need to use own savings? Well, I am not so sure if this is good for the market.

Conclusion? The focus is solely on trying to ensure everyone has a roof over their head which I think is good. All these measures are not likely to boost the property market in general as most of the properties mentioned above are the lower priced ones instead of the typical ones that most of the middle income Malaysians are complaining about. I shall not comment on whether their complaints are all justified but do note that many times, choices are still available but it may not be the one that everyone is looking for. As for loan approvals, I favour a safer lending policy and not one where everyone looking for loans easily getting one. When that happens, I will be worried for the property market. I think the budget 2017 has not changed much for the property market currently but for the lower middle income Malaysians, perhaps it’s time they get a home of their own within these few years. Cheers and happy buying one.

written on 22 Oct 2016

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Working in KL and Seremban, would Semenyih be a good choice?

A reader wrote in to ask about the possibility to buy Semenyih. He was working in Seremban while his girlfriend was working in KL. Should he be thinking about Semenyih as one of his choices? He cited affordability as one major factor affecting his decision. Secondly, the location should be between the working places of both him and his girlfriend. I gave him three questions instead of deciding because his decision should be based on his personal circumstances. It would be way better than someone working and staying in KL could; me. I assume he needs a place to stay soon and thus considering a secondary property.  I asked the following three questions:

semenyihlanded21.  Does he like Semenyih as a new and growing area? The reason why I ask is because it would take some time for newer areas to become populated and for more amenities to be available. To be frank, I do not prefer anyone to ask where to buy. The right question should always be WHY buy that particular property. For example if he needs a supermarket nearby, is it available? If he wants connection into a major expressway within 5 minutes, does the project provide for such?  Sometimes, one project may have a lake while another has a secondary forest  nearby, question is, which one do we like more?

2.   Secondly, has he viewed sufficient number of units for a closer comparison? Every project would have a different design which may not appeal to all. The quality of build would be very important too. What about the size, design and even the price? Viewing say 5 units would already allow for an objective comparison instead of just deciding where to buy before understanding the nitty-gritty of one particular project versus the other. Remember, an easy to refer Excel file would be extremely useful too.

semenyihlanded3.  Future-proofing it slightly.  What would happen within the next 5 years, would there be a likelihood for one side to be working at the same place as the other? For example, he may work in KL or his girlfriend may choose to work in Seremban instead. Many times, when we sit down and think a bit, we do realise that we may have a plan already in our mind of what we intend to do. For example, if KL is more likely as a place for career growth, then perhaps buying a place not too far away would be better than just a compromise of an area in the centre of Seremban and KL.

By the way, just to illustrate some availabilities, I have cut and paste two sets of choices from and  Yes, even landed property is still considered affordable but Semenyih is not actually next door to KL. It is around between 35 – 39km away from KL city Centre. So a lifestyle change would definitely be necessary. Worth it? Just a comparison between the property availability vs price? Yes. There are many other reasons too. Think and decide…

written on 21 Oct 2016

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