Global growth? DOWN. East Asia and Pacific? OKAY.

When the economy slows, the property market would not be too far behind. I think latest news is pointing in this direction. The World Bank, in its latest update of its Global Economic Prospects report has downgraded its 2016 global growth forecast by 0.5 per cent to 2.4 per cent. Read what earlier predictions were here. IMF’s Lagarde: 2016 will be dissapointing  Fortunately for us, it has also maintained its growth projections for East Asia and Pacific region at 6.3 percent. When China is excluded, the region will grow at 4.8 percent in 2016. Malaysia’s own projection is 4 – 4.5 percent which meant we should be growing below the average.

Note the word, GROWTH. Yes, economic activity is present and is still growing. Note the disparity between this part of the world versus the out of the region. Yes, we as in the whole East Asia and Pacific should now be the new centre of the world. I would think it’s foolish if investors were to exclude all investments into this part of the world. Seriously. The World Bank said, “This outlook assumes an orderly growth slowdown in China accompanied by steady progress on structural reforms and appropriate policy stimulus as needed.” It also added that Malaysia, Indonesia and Thailand will have rising investments while consumption growth in Thailand, the Philippines and Vietnam will be supported by low commodity prices. Low commodity is not really a great news but then again, if it’s growing, it’s a good story.

Last but not least would be these encouraging and positive sentence, World Bank Chief Economist and Senior Vice President Kaushik Basu said, “As advanced economies struggle to gain traction, most economies in South and East Asia are growing solidly, as are commodity-importing emerging economies around the world.” He also mentioned that due to the borrowing boom of many years, non-performing bank loans may be increasing. If you are asking about Malaysia, read here: Households Malaysia: Financial assets up RM97.9bil vs RM70.4 bil up in debt

Okay, it’s not really extreme bad news but the world is waking up to a slower growth. I think it’s time to expect the same for property transactions and prices too. Maintaining affordability to ensure attractiveness would be the theme. That’s why developers are building smaller sized units these days. Prices per sf is not really going down because the cost of production and materials have not been going down as per whatever I have been reading. It’s indeed a good time to go out there, find something worthwhile and making it our own during these periods of uncertainty in the minds of many. Happy investing.

written on 8 June 2016

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