According to the International Monetary Fund, the potential growth for emerging markets has slowed compared to before the 2008 crisis. Between 2008 – 2014, potential annual growth fell to 6.5 percent which is about 2 percentage points lower before 2008. In the next five years, 2015 – 2019, this is expected to drop further to just 5.2 percent due to the aging population, structural constraints and even slowing productivity. I think this would also also apply to Malaysia as well because the forecast for Malaysia’s GDP growth is around 5% for majority of all analysts with forecast for 2016 even lower at 4.5%. No, it is clear that Malaysia is not currently in danger of a sudden recesssion or even a technical one. (negative growth for two consecutive quarters).
Should we then be worried about this slower growth? Well, if you want to know, the projected growth for advanced economies would only be 1.6 percent and this meant that even these economies would continue to show high public and private debt. Just look at the US or Japan and we can see this kind of typical growth numbers.Even the second largest economy in the world, China is showing a slower growth as it starts to transition into a consumption based one from the previous investment-led one. Remember the world was pumping everything they have into China to get a foothold due to the huge potential market?
For Malaysia, the current slower growth may actually present an opportunity for property prices to moderate. Transactions have also moderated and many have chosen to wait instead of buying one. Many have indicated that renting may be a better option until prices drop to a level they are comfortable with. I personally do not believe this ‘comfortable’ level would ever happen. Perhaps if they re waiting for a more affordable level for the higher priced condos, it may happen. To wait for a RM250,000 property to dip below RM200,000? Well, this may need another financial crisis and a prolonged slow growth.
In fact if the crisis should suddenly happen tomorrow, all the small developers or the weaker ones together with those who were not so experienced may all be wiped out. They have bought lands which are too expensive to build and sell at a lower price. This include those who bought land at exorbitant prices around KLCC for example. By then, with the much lower prices across all types of properties, I think the current affordable property plans by the federal or the state governments would all have to be delayed or stopped. Even these low to medium income people that they are targeting maybe too fearful to buy a big item like a new housing. Is another crisis due soon? I think we better focus on the US or Europe for some signs. Not likely to start from Asia would be my personal opinion.
written on 8 Apr 2015
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