SOS Read this before you INVEST in Stocks
SOS Importance of correlation between properties and stocks?
sosfinance
Publish date: Sat, 17 Sep 2016, 08:44 PM
sosfinance
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VALUATION DOES NOT DETERMINE THE PRICE, IT'S JUST A TOOL TO ESTIMATE A VALUE OF A BIZ
www.sosfinancialplanning.blogspot.my
"How do you save RM50,000? - I shared with a friend on how to do it. I got a term life for RM280 p.a covering RM100k until 70 years old. I cancelled my wholelife insurance of RM2,800 p.a. for the same coverage up to 100 years old. Save RM2500 p.a x 20 years = RM50,000. (PM0122037325)
.....IS THIS ARTICLE FAKE OR FACT?? ANYONE CAN CONFIRM?
www.sosfinancialplanning.blogspot.my
"How do you save RM50,000? - I shared with a friend on how to do it. I got a term life for RM280 p.a covering RM100k until 70 years old. I cancelled my wholelife insurance of RM2,800 p.a. for the same coverage up to 100 years old. Save RM2500 p.a x 20 years = RM50,000. (PM0122037325)
.....IS THIS ARTICLE FAKE OR FACT?? ANYONE CAN CONFIRM?
PROPERTY PRICES
So far, I have read two or three Tan Sris (who are in property development biz) said that they are confident that property prices will recover in the next one or two years. And most developers will also wish it was the case. Once, a CEO of a multi billion listed company asked my view about property sector in Malaysia.
It may not be fruitful to discuss properties in broad view.
1. One have to focus on a specific region, i.e. either Klang Valley, Johor, Penang, KK or Kuching as each region has different structure of population, urbanisation, developments, employment opportunities, infrastructure or even stat government.
2. You have to split the sector into residentials (high rise or landed), commercial offices (or boutique shop) or retailers (shop lots or in shopping complex).
1H 2015 vs 1H 2016 PROPERTY SALE PERFORMANCE
1H2015 1H2016
Units launched Sold Units launched Sold
Condominium 4,259 779 (18%) 1,550 548 (35%)
Overall all types of
residential properties 10,829 4,371(40%) 7,172 2,829 (39%)
(source: the Star dated 17 Sep 2016, Sat)
Most "condonimium" developers will likely tell you this data is incorrect. I will leave it to you to figure out.
CONDOMINIUM RENTAL (Fully Furnished for 2016)
Mont Kiara (Palma) RM2,500 (previous year: RM3,200) Dropped 22%
Mont Kiara (Bayu) RM2,300 (previous year: RM3,900) Dropped 41%
This is only two examples I am aware of (not representative, but can be used as reference). Rental dropped from 20-40%.
Not sure about the price of the condominium. Just to show (likely) there is an oversupply. For this case, Mont Kiara ONLY.
KLANG VALLEY
1. Commercial offices - Glut, by 2018 more glut.
2. Retailers - Glut, by 2018 very very glut. (Many integrated shopping complex with apartments, hotels and commercial is coming up)
3. Condominium - Certain locations (many) oversupply
Within the condos or service apartment spectrum, again, one can break it into below RM500k, RM500 - 999k, and >RM1.0million. Those who bought above RM1.0m, if without rental guarantee, will find it hard to get it rented at 4% and above. Most corporate is cutting their budget.
Even those who bought at say about RM600k to RM800k, depending on location, will find it hard to rent out. This is because, people who bought those category, I figured, 50-70% are investors (not their first home). So, competition for tenants will be tough as there they supply is more than people can afford to pay. Say if their loan is about RM600k, monthly instalment is about RM3200. Hard to compete with Mont Kiara owners (mostly fully paid down), the condo may be RM800k, they are only asking for rental of RM2500 to RM2800. Lucky if you can rent it out.
NEARLY ALL DEVELOPERS CLAIM THEIR PROPERTIES ARE AT STRATEGIC LOCATIONS
1. A lot of time, it sound great that a service apartment or condo is located next to LRT or MRT, the price is a premium of 15-20% than condos that situated further away (more than 15 minutes walk). But, most people that can afford such places, most likely they can afford a car and seldom take LRT or MRT (Malaysia weather is hot, humid, wet, and sometime is not very safe).
2. There are so many new LRT and MRT stations (>100s). So, imagine, how many "strategic" locations for condos being sold on this premise and so many integrated shopping complex are also near to these stations.
3. So, buyers will find it hard to know, which is really a strategic location (as every developer will claim they are near LRT/MRT, schools, amenities, shopping complex, Tescos, cinemas, etc.)
WHAT IS THE CORRELATION BETWEEN STOCKS AND PROPERTIES
According to a researcher, in Malaysia, it is about 0.7654, (by Dr Christopher Shun), based on 18 years of data between 1992 to 2009.
More articles on SOS Read this before you INVEST in Stocks
SOS Ecoworld, MahSing, E&O, Glomac and Property Listed Companies 35,000 Unsold Units?
Created by sosfinance | Jul 14, 2018
Discussions
1 person likes this. Showing 15 of 15 comments
Tell you the Big Differences.
In Property you can manage it within your power. In stocks you are at the mercy of directors & those in charge.
In property. You can chose to sell, upgrade, rent it out or use it yourself. In stocks someone else is making all the decisions.
2016-09-17 22:46
Posted by Flintstones > Sep 17, 2016 10:47 PM | Report Abuse
So you think stocks will crash?
Whether Stock Crash or not nobody knows for sure.
What is sure now. Go search out THE MOST DEFENSIVE STOCKS TO BUY AND PREPARE YOURSELF WELL
SEE
JOHN MAYNARD KEYNES MANAGED 2 FUNDS RIGHT THROUGH THE GREAT DEPRESSION OF THE 1929 to 1930 when Dow crashed almost 90%.
Yet His Funds Did Very Well.
So KNOWLEDGE IS POWER!
Go GET KNOWLEDGE FIRST!
2016-09-17 23:09
From the perspective of foreign investors, our market already CRASHED, why? In USD term, we have loss about 30%.
If you notice, Japan Nikkei, when the Yen strengthen from USD1 to Yen124 to Yen 101, the Nikkei dropped from around 20,000 to 16,000.
Similarly, when you compared London stocks prior to Brexit, when sterling loss about 13% against USD, their stocks went up about 10%.
Mr Tong (The Edge), was only 32% invested. Why he think that?
Mr Tan Teng Boo, was also about 40% invested (if I am correct). Why he think that?
Like properties, one have to be very specific. Sometimes, when the stock market crashes, say 20% in 6 months, your stocks may be up 2%. So, the crash are meaningless to you. Of course, if we think the crash is temporary, then we take opportunity and buy the index, we may get a 30% return in say 2 years, if it recover.
However, I am very convinced that the real economy growth for the Top 5 economies going through slow growth (at least for one to two more years). And in USA, the financial markets (Stocks and Bonds) and its real economy is in diversion since 2008. The diversion (similar to risk), gap is getting bigger by the months. Hence, there is a higher chance of the financial markets will reconcile with the real economy by some significant adjustments to the financial markets.
So, crash in stocks means differently to different people. Depends on their exposure, asset allocations, net worth vs invested capital, holding power. For some who hardly invested, a stock market crash means nothing to them. But for someone who borrowed a lot and invested a lot, when he doesn't has holding power, he is likely to sell when stock market crash.
Similarly, those who "investors" who bought say 2-3 condos, thinking that they can flip or get 6% rental yield, are in for a shock when they receive their keys. You are lucky if you can rent out. Say you can only rent out at RM2,000, when you expect your rental to be RM3,000 to cover your instalment payment. So you are RM1,000 out flow per month. Any during this period, if you sell, unlikely you can get higher than the last price you paid for (for condos) which launched at RM800 to RM1,000 psf.
For those who cannot get it rented out (usually for integrated development with hotel, shopping complex, offices and condos which launched phase by phase in 3-5 years - due to noise, and continuing construction) for say one or two years after receiving VP, this person is pay say RM3,000 per month for two years without rental, you will have a RM72,000 out flow. So, the question is, do you have the holding power? What if you just have 2 similar type of condos, unable to rent out. That will be around RM144,000 for 2 years. PANIC? So, this "investor" is in serious crash even the market is stagnant. What if he worked in a bank or oil and gas industry, and ask to leave, they without sufficient saving, what should he do?
Crash is relative!!! A guy who kept all its net worth in Ringgit, already crashed about 30%. The last round, it takes about RM3 plus to Yen 1000, today , it is about RM4 per Yen 1,000.
2016-09-18 09:55
Tq Sos to share your very different view from others.
It is very true, usually I prefer to compare our RM vs Sing Dollar / RMB / USD , now we need to compare Rm to Thai Bath .
in overall , this will give me an idea of how is our Malaysia doing .
I'm always read Malaysia mainstream media with a Pinch of salt, especially from the mouth of incompetent one.
That's why Contract Manufacturers doing good all this while . As long there are Skillful employees with multi languages well verse sufficiently.
Hopefully, Malaysia will preserve this Uniquely plot.
It work out to be the last strongest asset especially during uncertainty.
2016-09-18 11:15
Sos, not all houses are meant to have positive cashflow. Time and time again, history has suggested that properties is an inflation hedge asset. It is true that properties correlate to stocks. But back in 1998, i remember well located properties never dropped in price. There were no buyers during the crisis but anybody who held on to their properties have seen significant gains to date. Based on your example, the investor is bleeding cash. But in the long term, the capital appreciation from those properties would neutralize the cash flow losses.
2016-09-18 12:50
The best asset class in malaysia is still properties which is historically proven. You can hold Nestle or Dutch Lady for 20 years or you can hold a Mont Kiara properties. After 20 years, you may see which asset has the better return.
2016-09-18 12:53
At least for now , The Buying Effort are weak.
This will not improved in short untill Malaysia major revenue eg. (O&G / Cpo) recovered.
We are desparately count on Exporter in E&E , gas, & tourism sector.
Hope, Malaysia take extra concern on this era. Education & Safety continuation effort to suit future talent need shall not be lack behind.
2016-09-18 13:17
Rental vs monthly installment is not the right indicator dude. Our country interest rate is still at the higher end in the region. Do you know what is SG interest rate? Only 1%. Rental vs monthly installment tells you only the underlying rental demand of the asset at that point of time. Analyzing properties is just like analyzing oil stocks. You got to think about the replacement cost. If i have a house that costs rm500k to build and it can only be rented at rm500, does it mean the house price is going to crash? No.
2016-09-18 13:47
@Flinstones, I have compared BU2/7, the CAGR is about 8% p.a. (28 years, bought in 1988), and Nestle Malaysia (I only have 10 years from Bloomberg, bought in 2006) CAGR is about 17%. Perhaps the first 10 years in BU, the CAGR is 10% or more. But there are many, during the 2010 to 2013 craze, many landed properties double in 3 years (i.e. CAGR 24%) but over a longer period, say 10-20 years, it will fall to 7-8% p.a. So, it depends when you buy or sell, similarly like stocks. Some i3 sifu said they made 400%-500% in 18 months. So, very hard to compare. As long as you have double digits for >10 years, you are doing great.
2016-09-18 14:33
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good analysis.
2016-09-17 22:22