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Stay focussed. 1MDB is not your concern.

A reader asked me a few days ago if he should proceed with his property purchase since 1MDB is such a huge issue. He asked if it would cause the collapse of the economy and bring with it the property market. Of course, if this is the case, it may be best to wait till the economy and the property market to collapse? He also said due to 1MDB, the property market may be stagnant for 2 years.
I think first things first. What’s the reason to buy today? For own stay? if it is for own stay and you seriously like the place and can afford, buy it, IF it is not overpriced. For investment? Look at the rental for that place. Is the rental healthy? Are there lots of empty units? Ask your friendly neighbourhood agent if that property is easy to rent out. If all the answers are negative, plus it is NOT overpriced, then buy it. In both cases, 1MDB does not appear at all.
Secondly, would 1MDB cause the economy to collapse? Well, even based on the worse that has been said thus far, it is said that 1MDB has debts of up to a few RM billions. Less than RM 5 billion. To be honest, I think this is a far fetched idea. It will give some negative implications including even rating downgrade possibility by Fitch Ratings in a few months time. However, for one company to cause the Malaysian economy to collapse? The Malaysian GDP in 2014 is US$312.4 Billion. (RM1,156 Billion). It is estimated to grow by 5% for 2015, thus it would be US$328 Billion (RM1,214 Billion). Tell me now, what’s the possibility of 1MDB causing the collapse of the Malaysian economy and subsequently the property market?
Of course, be very clear. If you expect the market to collapse, please do not trap yourself. Property takes a very long time to sell and get your money back.  If however you expect the market to be stagnant, then this is best time to ‘press’ the seller, especially the more motivated ones for a better price. Actually, there are still value in the market. Just need to be very clear about your goal for the next many years to come. Property investment? Stay focussed. 1MDB is not a main concern.
written on 31 Mar 2015
Next suggested article: Same mortgage rates into 2016

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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