Low petrol prices and the property market, not easy.

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A good friend forwarded to me the price for RON95 beginning 1st March 2016. The caption says, ‘great news keep coming.’ To be very honest, I love low petrol prices. However, low petrol prices also comes from low oil prices. Well, low oil prices is a big issue when about 20 percent of the country’s GDP is from the oil and gas sector. That’s Malaysia, of course. Oil price is also an issue when your country has a huge oil and gas industry despite not being a producer. Due to the bad times, these companies will close down and move out. Yes, I am talking about Singapore. Low oil prices may meant the country budget based on oil at US$50 per barrel would have to be recalibrated. Despite such low petrol prices, car sales fell by double digit in January 2016. Economy is really not well. This is Indonesia today.

To many of us, low petrol prices may seem like a welcoming news but the actual implication to the whole economy may be totally different. What happens when the whole economy slows down even if the petrol price is cheap? Well, it meant that the hard times become harder. The measures that a government can take would also be more restrained because revenue from oil has fallen a lot. When the whole market sentiment is negative, do we believe people would think about buying something as expensive and as sticky as a new home? The bad news from the oil and gas companies are still continuing! Read here: Oil and Gas, hard time continuing

Of course, there are definitely great news with low petrol prices. Perhaps now the local domestic travel would increase, come on, driving to and fro KL and Penang would only cost me lower than RM95 using my Persona. AirAsia reported very good results just this week. The share price has jumped. It seems that there is a target of getting RM105 billion from tourist spendings in 2016. It’s simply because travelling to countries like Malaysia has become even more cheaper. Yes, Ringgit is still down though the downtrend has switched to slightly uptrend, depending on what happens to the largest economy of the world. Perhaps all those restaurants, clothes shops and even developers would be more willing to take a slightly lower profit margin instead? It’s a bad time now, it’s not a good time to talk about greed. It’s best to talk about sustainability. We shall see what happens. A good friend joked that he has no worry about the property market as he can hold. I do hope everyone can be like him. Happy refuelling and driving with the current low petrol prices.

written on 1 Mar 2016

next suggested article: Falling oil prices and the actions of Warren Buffet


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