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That question of ‘best time to buy?’

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A reader who was buying his first property asked me a few questions. How bad would the crisis be affecting Malaysia and whether he would be adversely affected if interest rates were to increase suddenly. Thus, is this still the best time to buy? He gave two very valid examples of banks restructuring and even quoted that Groupon is laying off staffs in many countries. Based on readings and the latest available numbers, my reply to him as follows:

Financial crisis, if it starts, will not be from Malaysia. Look at the Non Performing Loan numbers for Malaysia, look at the earnings of companies and even the foreign currency reserves which is still 1.1 times the short term debt and far higher than even that biggest economy whose currency kept rising simply because of expectations. Until today, Malaysia is still having trade surpluses every month. In comparison, until today, for past many year that particular economy continue to have trade deficits and in other words, it kept borrowing money to cover these deficits. Yet, look at the strength of its currency today which has risen versus majority of any country in the world. Anyway, I don’t want to predict what will happen to such economies or how long can a country keep having trade deficits.

World economy wise however, there are lots of signs that the whole world is slowing. Malaysia’s second largest trading partner, China is slowing down a lot. The Europe is still very vulnerable and that’s not just Greece. ASEAN economies are not considered good currently. So, yes, the times are really tough and the conditions are definitely very volatile.

Many global banks and even other banks have been restructuring for higher efficiency. That includes Malaysian banks too. As a trend, online is becoming key and it is not a clever move to hold so many extra staffs. As for Groupon, it  has not been doing well in some markets for many years. It is not a sudden case happening due to current market situation. Many manufacturing concerns are also closing down its less efficient plants which are no longer cost-effective. As usual, when orders recover these plants may ramp up again. Truth is, all these are happening all the time but during bad times, all these news suddenly become so big and huge. As long as the restructuring helps these organisations become stronger, I actually view this as a good move. Short term is bad, of course but do we really want all companies to be inefficient and a domino effect when the situation gets tougher?

Back to the question, is this the best time to buy? Well, the better question is to understand our own financial standing. Are we ready to buy? In other words, are we buying something we can easily afford and not overs-stretching simply for something to make others say, ‘WOW,’ but you struggle to pay every month?

Second question, if an economic crisis strikes, do we think we can still keep our job? Note, if our company is not really doing well even during good times, we should be a little worried. Well, for performers such as the top sales person or the role shortage ones like Accountant or Programmer, I think maybe these professions are quite safe.

Third question is about the interest rate increase. How much can we withstand the rise? 1 percent? If our answer is 1 percent, I think we are okay for a long time more. The current interest rate is needed to help encourage economic growth. Increasing it will slow growth and increasing it by 1 percent is quite improbable. I have not read this from any analyst or economists predicting this within the next 12 months. The rate increase is said to be able to stem further fall in ringgit but what we do is no match for the expectation of US rate increase. Thus, any positive effects are likely to be temporary. I am not the BNM governor, so this is just a personal opinion.

Once we have answered all these questions, we would learn that there is no such thing as the best time to buy. To some of the buyers with deep pockets, the best time to buy is when everyone sells. Perhaps a better answer would be to buy when we are ready. If it is just to show off, then don’t buy. Besides even if we do not buy, we would have to pay rental anyway. If we stay in our parents’ home, please lah, pay rental too. They paid so much for us already, don’t burden them too much. Happy deciding and making your own decision based on your own financial standing.

written on 28 Sept 2015

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