Friday, 2 December 2016

Some thoughts on Malaysian ringgit

I'm definitely no expert on foreign exchange.

Was just thinking while walking back from lunch, as one does, that the degree of volatility doesn't seem to make sense. More so if people take the exchange rate as a proxy for your economy - while it does have bearing if the rate is long term and sustained, the sudden drop in currencies like MYR and Brazilian real doesn't jive with the economic fundamentals.

For example; we are still growing... our GDP growth is still positive compared to lots of other countries. We are still exporting a lot of goods despite the lower demand - after all, people around the world still need vegetable oil, petroleum and so on.

The problem is that if the speculators can sustain their attacks and the western media keeps repeating the same "bad news" / bad spin, then it becomes a self-fulfilling prophecy.

Sigh ... what can one do? I think to help the country, we must spend internally - to keep the momentum going.

Of course, one should spend wisely but we must not stop spending altogether.

Sunday, 11 September 2016

Should developers become financiers?

It was announced that property developers can apply for the licensed money lender permit that will allow them to provide loans to their buyers by the Minister for Urban Development.

The rate is supposedly capped at 12%.

About a couple of days after that, the 2nd Finance Minister came out to say that the idea is not feasible as there are many risks and costs to all parties concerned.

Today, it was reported that this matter was not even discussed in Cabinet yet, so why did Noh Omar announce the money lending permit in the 1st place?

So let's break it down a little bit:

Technically, there is nothing wrong with a developer applying for a money lender license. It's just whether they want to or not.

The government is implementing the Rent to Own concept.

The 2 ministers are cornering the developers by first offering them the poison chalice of the lending licence then taking it away.

The developers are now put in the position of:

  • If they take the lending license, they are competing with the banks. The banks may not take kindly to their customers for bridging and end financing taking away the end financing part - hence, the bridging financing can suddenly turn very difficult to get, thus squeezing the developers' business
  • If they don't take the license, then public perception can turn against them because to desperate buyers, this could be their last resort to purchasing a new home in spite of their inability to qualify at the bank or their bad credit record. Then it will a PR nightmare for the developers.
So how to get out of this quandary?

Ha ... offer the Rent to Own option to the buyers, much like what SDB is doing!

Why this is generally a better option but kind of screws the developer?
  • The buyer is sort of paying the 10% down payment in instalments in the form of rent
  • The developer gets to register a sale and make some income, albeit delayed
  • The banks can hopefully use the rental payment record as a proxy for loan repayment behaviour then grant the 90% loan after some years based on proven record.
  • Reducing risky 100% loans in the country
  • Forcing some discipline onto errant credit record holders if they really want to stay in that unit
  • Developer now has to become a landlord and will be held accountable for damages, bad construction and must make fixes as demanded by the tenant/buyer instead of washing their hands after the 30 day make-good period
Anyway, this is all guesswork on my part but after observing the politics in this country for a while, as we know - nothing is ever quite what it seems.

Things are now happening on a more obtuse and strategic way, generally with the rakyat's interest at heart - I say this because I deal with some GLCs and they have been very clear that the direction from the top is that all initiatives MUST benefit the rakyat. 

So that's my take on it ... we'll see how it goes. I could be wrong, who knows?

Friday, 29 July 2016

Becoming a slum lord?

I found a small commercial unit with an asking price of below 100k.

Possibly something to buy in cash, no hassle with loans.

However, it is in a fairly low cost area so capital appreciation might be a challenge?

But the returns are decent at 7% based on the current rental being paid by the tenant against the asking price of the property. Of course if the rental was raised and the price is bargained down, the return increases.

Going to view the place soon, hope it is a good deal.