What if the Prime Minister of the 6th largest economy in the world tells the world that the next crisis will be coming soon? Yes, we are talking about United Kingdom’s Prime Minister, David Cameron. Would you believe it? He said the eurozone is possibly going into its third recession because of high unemployment, falling growth and the real risk of falling prices too. As for emerging markets which were the drivers of growth, they are slowing down. Emerging markets would of course include the world’s second largest economy, China as well. He also quoted the Ebola epidemic, Middle East conflict as well as Russia’s illegal actions in Ukraine as contributing further to ‘instability’ and ‘uncertainty.’ He also said his own country is doing well currently but may face headwinds when the world goes into recession. Of course, all his political opponents have claimed that he is just trying to divert everyone away from the economic problems at home. His reasons are pretty real and are based on all the current happenings.
While he did not say how long this new crisis would be but perhaps he is saying the same thing as an earlier prediction by a US company? Read here: 65% probability – recession by end 2015 or an even earlier prediction? Read here: Arturo Bris – Crisis Looming Surely when everyone is saying the same thing, it should be happening. Let’s assume the crisis really do come, just like the 2008 one which started in America. What should you do now? Well, if you own a property, perhaps you need to call your agent and start to sell your property now. This allows you to transfer your asset from property into cash and get ready for the potential price fall for you to buy back your property as lower prices. Even if you do not believe him, with regards to property investment strategy, this may be the time you become really careful. Stop buying properties which seems to be overpriced. If it’s for own stay, it’s ok. Thus far, crisis do not last forever and many countries have learnt to recover from crisis better these days unless they are the super poor ones.
In a discussion the other day with a group of friends, they were also talking about the potential crisis. Thus they were not thinking of buying any property today. I told them, there’s no right and wrong because no such as thing as anyone who is able to predict the crisis no matter how statistically proficient they are. However, if they seriously believe a crisis is coming, then perhaps they can think about buying a new launch by an established developer, especially within 2015. Of course, think about the price per sf for that development and its overall price because after crisis, the price psf and the overall price would recover higher, for those which were on the lower end. Yes, I think RM550psf and below to be on the lower end. The reason is because costs including land, material and labour are still going up, especially during good economic times. As for the usual 3 year completion period, the new property should be ready to handover the keys in 2018. By then, an usual crisis would have been over and as usual, you can make a quick sale to get profits and use it for your next purchase. If you only bought in 2016, you may miss out on the opportunity by one year. 🙂 Not a big issue but this can be a strategy if you really believe 2015 is a crisis year.
written on 17 Nov 2014
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