Food inflation in Malaysia and Singapore.

We are always saying how things are cheaper across the Causeway and I do it too. 

I have said it often enough to get rebuked by some of my Malaysian friends.

"You Singaporeans only find it cheap because of the strong S$. 

"Life is actually very difficult for common Malaysians, you know.

"And you people come here and drive prices up.

"You think the people in Johor like higher prices?"





I grew up loving McDonald's fast food.

It was always a treat.

These days, I still go to McDonald's and I like ordering the S$2.50 Fillet o fish. 

Since they dropped the price to S$2.00 before increasing it to S$2.50 for the burger alone, I have not had the meals.

The meal comes with fries and a drink but costs S$5.00.

It is just paying more for extra (and empty) calories which I don't need.





In JB, I remember it cost me about RM9.00 for a Fillet o fish meal.

That is less than S$3.00!

It is like paying 50c for fries and a drink!

It is a no brainer for me.

Of course, I would take the meal! 

Yes, I know.

Suddenly, I am OK with with the extra (and empty) calories.

Bad AK! Bad AK!





For the Malaysians, however, paying for a Fillet o fish meal in Malaysia is like Singaporeans paying for a Fillet o fish meal in Singapore.

It is not more affordable for them.

Actually, it is the opposite.

I found out that an optometrist makes about RM4,000 in Malaysia but an optometrist makes about S$4,000 in Singapore.

The former pays RM9.00 (0.225% of his salary) while the latter pays S$5.00 (0.125% of his salary) for the same meal.

Although inflation is affecting food prices everywhere, it is worse in Malaysia than in Singapore.

Malaysia Food Inflation  Forecast 2016-2020

Food Inflation in Malaysia is expected to be 4.50 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate Food Inflation in Malaysia to stand at 4.70 in 12 months time. Source: HERE.

Singapore Food Inflation  Forecast 2016-2020

Food Inflation in Singapore is expected to be 2.50 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate Food Inflation in Singapore to stand at 2.90 in 12 months time. Source: HERE.

I have made a mental note to be more sensitive when I talk about the cost of living when I am with my Malaysian friends.

Malaysia cuts food subsidies.




Related post:
We manage our savings better!
Malaysia and India pay higher interests in similar pension schemes but our Singapore dollar is rated AAA and has appreciated against the currencies of many other countries.

Mr. Lee Kuan Yew said China could become pushy.

"I don't want to sound apocalyptic but I don't see Taiwan as being able to resist the pull of the mainland. There will come a time when the 7th fleet cannot intervene." Mr. Lee Kuan Yew.

A long time ago in ancient China, there was a big village that sat on both banks of a river. One day, there was a big fight in the village and villagers living on the left bank said they wanted to have nothing to do with the villagers on the right bank. 

The village chief who was living on the right bank rejected this and called the newly appointed village chief on the left bank a traitor.

Then, there was a small village farther inland on the right bank that was friendly with the big village. Although the big village was broken into two and continued to quarrel, it had nothing to do with the small village. 

A case of domestic conflict, chief of the small village thought.

The small village was quite good at doing certain things and designing war chariots was one of them. Being small, the village didn't have room to test them and would send them to the left bank of the big village for testing. The chariots had to pass through the right bank of the big village to do so and for years that went on without incident.

Then, one day, the quarrel in the big village escalated. On that fateful day, the chariots being tested on the left bank were on their way back to the small village. 

It didn't matter that the late chief of the small village helped them before, the right bank which sought to isolate the left bank took hold of the chariots. The small village which needed the big village in more ways than one was helpless.

The small village then understood the saying:

穷不与富斗，富不与官斗。

In ancient China, the rich would pay money just to get a position in government. Being rich was good but being rich and powerful was better.

Got power, can be pushy. 

Got power, can be assertive.

Of course, it was not the first time our country's first Prime Minister, the late Mr. Lee Kuan Yew, got it right.

Related post:
Mr Lee Kuan Yew on the Eurozone crisis.

“As the case is still under investigation, no further information is available. The suspected controlled items are still kept at a customs storage place in Tuen Mun. They have been stored indoors since December 6,” a spokesman said.

At a daily press briefing, Chinese foreign ministry spokesman Geng Shuang would only say that the Hong Kong government is handling the incident in accordance with relevant laws.

Beijing has always known about the arrangements between Taiwan and Singapore and remained silent on the issue until now, seizure of the armoured vehicles provides it with an excellent opportunity. Whether this occasion is orchestrated or opportunistic is of secondary importance. The affair gives China floor to push back against the undesirable activity, drive a wedge between Singapore and Taiwan and give a lesson to Singapore for recent statements on the South China Sea and China’s role in the dispute.

$500,000 stuck in a bad commercial space investment! (UPDATED)

UPDATED:
It is an increasingly common sight these days in the heartlands: 

Spanking new mixed-use developments with rows and rows of empty shop spaces plastered with posters and banners screaming “For Rent” or “For Sale”. 

From Kensington Square along Upper Paya Lebar Road and Novena Regency to The Midtown @ Hougang and MacPherson Mall, to name a few...
Source: TODAY




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READER:

Hello AK, 

I have a question regarding real estate that I would like to ask you. 

I am a responsible investor and does my own homework before making any investment, so I will not make you responsible for any decisions I make. 

I have it down here in writing so you can have a peace of mind when you reply to my email. 

I am a stock investor which means I am not familiar with real estate in Singapore. 

I know that you have invested in real estate before, therefore, I would like to seek you help for an issue. 

My father made some money speculating on real estates in the past. 

So as most speculators who have made money speculating on real estate, my father made the mistake of not doing enough homework, not filtering out market noise (mostly the real estate agents), thinking that property prices will go up forever and not position sizing. 

My father laid out about (half a million dollars) on a shop unit, confident that the price of the shop will appreciate greatly in the future. 

He bought it in 2010 or 2011, before the building was constructed. 

Ever since, he has not been able to rent his shop out for rental. 70% to 80% of the shops in the building is vacant since day 1. 

My father has been paying the monthly management fee (about $700/month), annual property tax (no idea how much) and not to mentioned the initial stamp duties and other fees associated with purchasing a property in Singapore. 

Obviously, my father has not been able to find a buyer, not even if he sells it at a loss. 

The size of the shop is about 3m in length and 5m deep. 

My father laid out about half of his cash in this property and another half in another property (this has rental income, so it's fine. 

However, if you add the fees and taxes of both properties, my father hardly makes any money.). 

So my father has been very cash strapped (Situation getting more dire with every month, to be honest). 

Unfortunately, my father made the purchases before I knew anything about investments (not like he will listen to me though).

- Nobody wants to buy/rent the shop

- Monthly management fee ($700+/ month) (Management 很好赚，no AEI or anything, but collects $700+ a month)

- Annual property taxes

- High entry price (my father estimated the market prices of his shop has decreased about 20%)

So my question is, do you have any recommendations as on what can be our next step? 

Any ways to get rid of the property or anything that we can do cut/reduce the losses?

It is quite a sticky situation but thanks in advance. 

Taken from a website 
promoting the mall to investors.

AK says:
Remember what you say here hor. 

Indemnity form signed. ;)

OK, fact is nobody knows for sure what the future might bring. 

What we know for sure is the now and the present. 

The only people who seem to know (the future) for sure are the property agents especially when they want to sell us something. ;p






If we had bought into a piece of property thinking or hoping that the price will go up in future, we are more speculators than investors. 

Remember my blog post on the two questions we should ask if we are speculating in properties?

It is not only whether the property offers value for money. 

We should also ask if we have deep pockets. (See related post #2.)





It seems to me that your dad does not have deep pockets and he is suffering from a double whammy because the property wasn't value for money.

I have a friend in a similar situation and it is causing a serious strain on his family's finances. 

I found out recently when I (being kaypoh) asked him why he seemed so cash strapped when his job pays reasonably well. 






He bought a property and it is not generating cash flow. 

Instead of an asset, he got a liability.

I told him he would be better off disposing it.

"What if the price goes up in future?"

Alamak. 

I told him I don't know what is going to happen in future but I see what the situation is doing to him now. 





Fortunately, his wife agreed that it would be best to dispose of the "asset" even at a loss.

Don't bite off more than we can chew. 

If we bit off more than we can chew, we would do well to spit it out or else we might choke. 

Of course, some handle choking better than others. 

Quite a few could choke to death.

Best wishes,
AK





P.S. The property which the reader's dad bought is not in Alexandra Mall. 

It is in another part of Singapore. 

Not revealing the location of the property in question, I am just using Alexandra Mall as an example. 

Yes, there are quite a few of these "promising" malls which were marketed to retail investors in Singapore in recent years.





Related posts:
1. Nobody cares more about our money...
2. Two questions we should ask...
3. Disastrous investments in property...

Buy 99 years leasehold or freehold property in Singapore?

For home buyers in Singapore, most would qualify for a BTO HDB flat. It gives the best value for money. 

Even a resale HDB flat is a good deal compared to the sky high asking prices of private condominiums. 

However, regular readers know that I would caution against buying very old HDB flats.






"It's OK lah. I like the location and there are 60 years left to the lease."

And how long are you going to be staying there for? Is there a possibility that you might want or have to sell it sometime in the future? 

To be prudent, we might want to think a bit further along those lines.







For whatever reason, many people aspire to stay in a private property here even though it would cost at least 3 times more compared to a BTO HDB flat, location for location, size for size. 

And it is not $50,000 for a HDB flat versus $150,000 for a condo hor. 

It is more like $350,000 for a HDB flat versus $1 million for a condo kind of proportion!

Hello! This is Singapore!





Some people pay so much just to stay in private properties that they become slaves to their mortgages. They become house poor. 

House poor is definitely not fun. Why? 

No money left to have fun lor.

Even if people can comfortably afford to stay in private properties, to me, one compelling reason to go private in Singapore is because we want to get a property sitting on freehold land or with a land lease that is significantly longer than 99 years. 







Otherwise, buying a private condo (with a 99 years land lease) here is like paying at least 3 times more for a home just because it comes with some (usually inadequate) facilities which have to be shared with tens or hundreds of other households in the estate. 

(In the case of buying a landed property with a 99 years land lease, don't even have facilities lor. Alamak. Does that sound similar to a HDB flat?)

Oh, did I also mention that the monthly building maintenance fee which condo dwellers have to pay could be 5 times more than what a HDB flat of comparable size would attract?

Silly, isn't it?





So, if you are buying a private property in Singapore, with very few exceptions, it is my opinion that unless the price is truly attractive (think Rule of 15 and value for money), it should be on freehold land or 999 years leasehold land.





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For those who do not follow me on Facebook, this was a conversation I had with a few readers on the issue of lease decay:

Jack James:
Does it matter ? Hahahha .

Ooooii ... our Sarawak landed houses are all on 60 years lease la !!

Assi AK:
I not staying in Sarawak wor.

Jack James:
Just to tell you such lease/leasehold/999years/ freehold are really not a big deal .

Assi AK:
If I don't have a choice, then, nothing to say. If I have a choice, I rather have a longer land lease.

Lease decay does not change whether it is landed or not.

It matters if you care about leaving your home as a legacy for future generations.

Jack James:
Trust me , 99years is already a big deal . 

My colleague parents bought 3 rooms flat at Little India area for S$6,500 and now it worths close to S$400,000 .
So long , you have something on hands , it appreciates .
Well , even if you have freehold property , don't dream the next generation would love to stay at the old hundred years old house , they probably cash out and buy new houses . In view of that , buying lease or freehold for next generation ? I am sure they will cash out too . No problem one la lease units.

Assi AK:
What future generations do is up to them.

I am inspired by how my friend's family stay in a FH walk up apartment which their grandfather left behind. He bought a few units in the estate back then. They can collect rent in perpetuity. No issue with lease decay. We have to do what matches our motivation.

Jack James:
Wait until it is 100 years and see who will rent a 100 years old freehold condo .

Assi AK:

Haha... Singapore is not that old yet but going by what I see in the USA, homes which are more than 100 years old find ready tenants too... Just need renovation from time to time but there is no problem with lease decay.

It costs money to renovate an old property but it beats returning the asset to SLA upon expiry of the land lease.

Jack James:
I can see you inject a big fears on lease decay . In any circumstances , you will still reap a big profits in leasehold . Not an issue . Just be SMART to cash out before it is too late .

Seah Chen Yang:
by the time it reach 100 years, you are already long dead to know about it and can do nothing to change it either way. lol. so that is why AK say freehold or not depends on whether you wanna leave it for your next generation and we have no control on what they want to do after we pass even if we say we want to leave it for them to earn rental income for life but they choose to sell for capital gain after we pass.

Assi AK: 

Yup, owners of 99/60 years leasehold properties must bear that in mind. Lease decay is a real issue which many property agents play down because it suits their purpose. Having said that, all investments are good at the right price.

We can only hope that our future generations will be financially prudent and savvy. We can only make what we feel are the best decisions for them when we are still around. Right?

Raymond Chiam:
U.s houses may be old but they are not 10 over storeys like our FH condo. Such tall buildings may become structurely unsound after 40, 50 years. Let alone 100! Definitely need to tear down n rebuild n that's provided neighbours don't all opt for en bloc. So FH unlikely to last more than 2 generations in my opinion

Assi AK "... built to ensure safety in the event that they are overloaded beyond the calculated "design event" and/or to account for mistakes in the building's design or construction... The combination of using a 50-year recurrence for design loading events and safety factors in construction typically results in a design exceedance interval of about 500 years, with special buildings (as mentioned above) having intervals of 1,000 years or more. This means we would expect a typical structure to fail once in every 500 to 1,000 years."
Source:
http://www.independent.co.uk/.../how-long-are-skyscrapers...

How long are skyscrapers built to last?

INDEPENDENT.CO.UK

Assi AK I did a search because I remember a friend telling me that unless it was built in the 70s or early 80s, newer skyscrapers are able to last a long time.

Assi AK It might also be interesting to note that compared to buying land in Singapore, construction cost is relatively inexpensive. Having land or a share of the land in perpetuity (even for redevelopment) is better than returning the land to SLA when the lease expires.

Assi AK If we are worried, we can always stick to buying FH condos in Geylang. They are typically a maximum of 8 storeys high. ;p

Assi AK Anyway, if it comes to a need for redevelopment, it is going to be generations away. All I can do is leave my future generations assets which I hope they will cherish. What happens in the future will be their responsibility. 

A decision to buy FH, 999 years (as good as FH) or 99 years (these days even 60 years or 30 years) leasehold properties is only probably right or wrong in relation to our motivations. 

What we choose to buy should very much depend on what we plan on achieving.

As usual, if you have money oozing out from your nose and ears, you can pretty much buy whatever you want. Don't mind me.

AK is just a frog croaking in a well.







Read:
Buying freehold.
Related post:
60 years leasehold condo in Singapore.