Mart is in perfect storm alignment
Published on: Monday, December 29, 2014
KOTA KINABALU: Year of the Goat 2015 will herald the GST billing regime amid falling commodity prices, ringgit value, stocks, business transactions, tourist numbers, cooling measures to dampen the property market plagued by speculators, tightening of bank lending qualification, rising costs and business downturn – all aligning for a perfect storm into 2015. A year that will see much higher bills.On the international scene, things are bleak with wars and conflicts sapping economic recovery with falling oil prices, coupled with unpredictable massive weather changes. Some countries are in technical recession. Funds are flowing out – legal and the illegal, and FDI (Foreign Direct Investment) figures are falling.ADVERTISEMENT Even the DBKK parking coupon implementation is being blamed by some quarters for anticipated business downturn of cash-collecting retail outlets like coffeeshops here.Notably the political representative class' salaries and allowances were adjusted many times upwards through the years, as were those of civil servants. Some retailers in rateable areas claimed that many customers shied away from patronising their shops due to the estimation hassle of using parking coupon and the potential high penalty of not using parking coupon, even when parking vacancy is not a problem.Strictly speaking, Sabah's less-than-40 storeys high rise structures do not qualify for skyscraper status hence the skyscraper jink should not apply and a highest record 56-storey condo did not take off this year as projected last year. Shortage of labour, buyers, talents and material will continue to delay some projects.ADVERTISEMENT Only cinemas offering temporal escapism, money lenders and mobile devices shops reported blooming business outlooks.How fares the local property market? The construction industry remains bullish and growing. The demand for affordable housing will always be there as usual.
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The slow small secondary housing market remains popular but will still face a dearth of desirable property for sale, rental property face longer take-up rate, depending on location and type. Property owners would still expect premium pricing for their property meant for sale, and rent too. Tourism related property development will trend upwards with some re-considerations. The market needs higher income level of the populace to have more depth as the investing segment is a small minority, and this played out this year vindicating valuer Datuk Chong Choon Kim's opinion. In his budget speech last October, Prime Minister Najib Razak announced a target of increasing the share of GDP paid out as wages from 34 per cent in 2014 to 40 per cent by 2020.The wage share is a way to track how national economic wealth is shared between workers, employers, and taxes.Between 2008 and 2013, the ringgit value of the share of GDP going to wages increased by an average 8.7 per cent per year. Assuming a 6 per cent growth rate in GDP, a 40 per cent wage share of GDP by 2020 implies an increase of 8.7 per cent per year in the ringgit value of wage share from 2014 to 2020.With the inflationary impacts of fuel price adjustments and the implementation of the Goods and Services Tax (GST), Malaysian incomes will be coming under greater cost pressure over the next six years.The wage share is an important indicator of the relative balance of power between workers and capital, and the willingness of government to address the balance.For 2013, the last year with complete data, 33.6 per cent of GDP went towards workers' wages, 64.2 per cent was retained by employers as surplus, and a mere 2.2 per cent was collected as taxes.The wage share in Malaysia has been in the doldrums for decades. In 1971, 33.8 per cent of GDP was paid as wages, 51.7 per cent was employers' operating surplus, and taxes comprised a higher share of 14.5 per cent of GDP.In short, wages take up as much of a proportion of today's economy as they did in 1971 with the value of the Ringgit much lower as is the purchasing power today.In economically advanced countries such as South Korea the wage share is around 63 per cent of GDP. Even Thailand pays out a similar share of GDP to its workers. Malaysia's wage share is very low by international standards.Nobel Laureate in Economics Joseph Stiglitz in September, expressed his shock at how low the Malaysian wage share is.Institut Rakyat's analysis of the Budget 2015 target of 40 per cent wage share by 2020 suggested that the government wasn't being ambitious enough in its measures to increase the share of wages in GDP.While the government plans to increase its share of tax revenue with the Goods and Services Tax, this boost is effectively coming out of workers' incomes. Yet the employers control the lion's share of 64.2 per cent of GDP. Employers appear to be getting an easier ride from the Malaysian government. Contrast this to the case of South Korea whose citizens are increasingly visiting Sabah as tourists and business operators, where the government intervened actively to force employers to share growing national wealth with their workers, leading to one of the highest wage shares in the world. In 1950, South Korea and Malaya were at similar economic levels.Many Malaysians have not travelled abroad and the frog-under-the coconut extremists are going to be more problematic when economic stresses start to aggravate in future.By comparison, the wage share in more developed economies ranges from 57.9 per cent (US and Germany), 59.6 per cent (Japan), to 63.7 per cent (South Korea). Even Thailand boasted a wage share of 63 per cent in 2006.Slower growth in the volume of wages will impede domestic consumption. Coupled with the highest household indebtedness in Asia (81.7 per cent of GDP in 2014) there is cause for concern that the engine of Malaysia's economic growth will grind down amidst hostile global economic conditions. This will ultimately bite into both employers' revenue and government tax takings.S P Setia, Mah Sing and others in big projects here in Sabah contemplating their launch of new residential components face some issues in pricing strategy as the beyond RM1,000 per square foot market will be soft in 2015. Rental inches up wards facing stiff resistance, business cycles shorten, some retail outlets closing down, commercial and industrial property market being a buyers and tenants playground and Sabah's Grade A office comes into play in the equation leading into 2016 as will be the many retail floor mall outlets and two more cinemas.Neighbouring Vietnam, not part of the BMP-EAGA, just across the South China Sea with its Gold Coast resorts potential facing West Coast of Sabah will compete with Sabah's Gold Coast potential in the long run, discounting Philippines' Palawan. Currently some 330,000 Russians and others throng Vietnam's coastal resort attractions. Malaysia's S P Setia Group has business operations in Vietnam with a much bigger population base and leadership determination direction. There is currently no direct air and sea link between Sabah and Vietnam, but the trade and tourism synergy potential is good for both states.At the beginning of 2014, Shareda Secretary General Ben Kong said that property expos or shows would do well being just as property exhibitions but not drivers for sales. He was right in most cases, which a valuer said would likely to be flat in transactions or plateaued at best with various government agencies offering housing to public servants soaking up demand from the public sector employees.A continued dependency on Foreign Direct Investment with little to no technology transfer or skills upgrading seemingly only perpetuate economic middle-income status.Meanwhile get rich guru Robert Kiyosaki, author of the bestselling Rich Dad, Poor Dad series of financial advice books, inspiring many people to invest in real estate leveraging bank loans had filed for bankruptcy protection for one of his companies like most rich people do to protect their wealth.When Kiyosaki's company, Rich Global LLC was ordered to fork out about US$24mil (approximately RM80.6mil) to the Learning Annex and its founder, Bill Zanker, Kiyosaki filed for bankruptcy protection.Kiyosaki had reportedly used the Learning Annex platform to organise several high-profile speaking engagements, including an appearance at Madison Square Garden.The Rich Global-Learning Annex relationship reportedly generated sales of US$438 million (RM1.47 billion), of which Rich Global got nearly US$45 million in royalties.However, the court agreed with Learning Annex that Rich Global did not pay the required percentage of profits and ordered the latter to pay just under US$24mil (approximately RM80.6mil).The move to file for bankruptcy protection had many thinking that the author has gone bankrupt. In reality, it was Rich Global that filed for corporate bankruptcy, not Kiyosaki himself estimated to be worth US$80mil (RM268.6 million).Stay up-to-date by following Daily Express’s Telegram channel.
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Kiyosaki also operates as many as 10 other companies. Rich Global was just one of them and was said to be worth only US$1.8mil (RM6mil) in assets when it went under – barely a fraction of the US$24mil dollar judgment.In Kiyosaki's case, filing for corporate bankruptcy was a shrewd business strategy intended to safeguard his personal finances. As property speculators take a breather, some depressed with inability to sell high and make more money, there is more to life than messing with property investments.