All Over the World

19 06 2010

Source:http://investkk.com/all-over-the-world/
This Article contributed by CSK who is enjoying his semi retired life now. He also make it through property. Here he shares his thought of life which we can learn from.

THE BEST DEFENCE IS A GOOD OFFENSE

Our national debt is already 54% of our GDP. At this rate, Malaysia will be another “Greece” in 10 years’ time. We will go bust by 2019 with a national debt of RM1,158 billion if we continues to accumulate debt at the current rate of 12 % a year. (By the way, the US debt had reached a mind-boggling record of US$13,050,826,460,886.97 on June 1, 2010 according to US official figures. Their debt has more than doubled in the last 10 years and now stands at just under 90 percent of annual US gross domestic product).

To avoid the “Greek incident” where their debt had already exceeded GDP, Minister in the Prime Minister’s Department Datuk Seri Idris Jala said the subsidies given to various sectors must be “rationalized”. This is a nice polite and politically correct word of saying that subsidies must be “removed”. The question is how and by when.

Put it in another way, we are going to have a political “time bomb” if we do not do something fast. So what is happening now is that the government is making recommendations to increase prices of subsidized big ticket items such as fuel, gas, food and toll over the next few years. Apart from this, we can be sure there will also be plenty other creative ways by the Government to increase revenues when they need to. Such as charging fees for government services, higher police, traffic and parking fines, municipal / housing rates, stamp duties, imposing penalty charges for late payment etc

Recent Government’s move to reduce the number of foreign workers in the country will affect developers and agriculture sectors the most. The result will be delays leading to possible price increases in property and food / services. With the impending GST, increasing costs for construction materials and labor shortage, the result will be higher property prices. Unlike the stock market where prices can fluctuate wildly due to volatility, the property market generally will either plateau or increase; more so in good locations.

The multiplier effect of increasing costs at the end of the day get pass down to the consumers. Whether for rich or poor, we all have to eat 3 meals a day and it is going to hurt the poor more than the rich. Whether you have an income or not, such as retirees or the unemployed, the GST is a permanent income tax on all consumers – more like a punishing tax on the majority of us who are poor rather than the minority who are rich. We are all consumers irrespective of wealth and the GST burdens the economically disadvantaged by making the poor poorer.

I still remember when a plate of economy rice was RM3 only. Now you have to pay RM5.00 but the derived value of living from the same plate of rice is still the same. So our cost of living had gone up 67% but the plate of economy rice is still the same, maybe less. Have you noticed how innovative manufacturers now repackage their items into smaller packs eg. cigarettes and still charge the same price for less amount? This gives unobservant consumers the false thought that they are still getting good value for money because pricing had remained unchanged (although the contents are less). Our standard of living had actually gone down as cost of living goes up.

Taking the cue from the art of war where Prussian military theorist Carl von Clausewitz once said “the best defense is a good offense” and Sun Tzu who advocated that to win a thousand battles is to know your enemy, we can employ property investment as a defensive investing strategy.

A terrace house in Singapore cost 5 times or more as much as the same house in Malaysia. Looking nearer to home, take a look at property prices between KL and us in KK. Some 10 years back, it is unheard of to see terrace houses in prime locations at Subang or PJ fetching close to RM1m. Flip through the classified pages of the NST or Star today and you will see this is the new benchmark. As for bungalows, be ready with RM3m and above in your pocket.

Those who understands the situation will know that the move is necessary, or else our children will suffer in future, perhaps like Greece where civil servants get their pay and pension cut. A gradual reduction program now will be the best way to cushion the impact of higher costs. Removal or reduction of subsidies will surely affect you and me, but there is no choice. It is not an option, but a necessity for the future generations to be free from the clutches of subsidies and artificial pricing that distort competitiveness in our global village.

The best defense is to invest in properties the soonest you can and not wait because prices are not going to come down. Like food, shelter also a basic need as everyone need to have a roof over their heads. When you made it rich, you may then want to upgrade to a bungalow. But whether it is a need or want, which way you look at it, it boils down to our basic need for food and shelter. And prices are going up. Happy Investing.

You cannot Grow Land..CK Wong & MY DAD


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