Risk bubble on Emerging?

A bubble in emerging markets is it really fear?

It is true that global growth is driven by emerging markets, whose weight in world GDP will soon be 50%. Alongside the weighting of emerging markets in global financial markets gradually caught up, which should encourage investors from developed markets to rebalance their portfolios to benefit from these regions structurally underweight. For now, their weightings in the indices remain significantly below their weight in world GDP.

The fear of formation of a bubble has its origins in the difficulties to detect: it finds the existence of a bubble until it bursts. As Alan Greenspan said: "Currently, economists are unable to provide a strong reversal of sentiment. A collapse in confidence is generally described as the bursting of a bubble, an event that becomes undeniable to post only. "

The TMT bubble has lasted seven years, after recorded an absolute performance of over 1200%, a cumulative outperformance versus the S & P 500 by nearly 1000% (equivalent to an annualized outperformance of 39%). The Japanese bubble lasted nine years, after recorded an absolute performance of over 500%, a cumulative outperformance versus the MSCI World index by almost 250% (equivalent to an annualized outperformance of 15%). The Asian Tigers bubble lasted three years, after recorded an absolute performance of over 630%, a cumulative outperformance versus the MSCI World Index by over 600% (equivalent to an annualized outperformance of 110%).

We compared this performance with that of emerging markets between 2001 and 2007 to determine if we could describe this latest speculative bubble: the rise of emerging markets has lasted six years, after recorded an absolute performance of over 400% or a cumulative outperformance of the MSCI World index by almost 350% (equivalent to an annualized outperformance of 28%). These performances are quite close to those of a bubble, and if it were a bubble, it has already exploded. But we never saw the formation of a bubble so soon after the breakup of the former.

So you do not feel that these markets are expensive?

In terms of fundamental value, it should be noted that the ratio P / BV (Price / book value, estimated in 2010) has remained broadly in line with historical levels since 2003, compared with estimates of ROE (Return on Equity) 2010. Furthermore, compared to other regions, the emerging market valuations are not excessive given the current ratio ROE. The ratio P / BV is not only a reflection of the value creation, but also the projected growth in the long term. With a ROE equal to that of the United States, emerging markets deserve a better value. It is easy to justify the current valuation of the MSCI Emergent, given its current profitability compared to other regions and because it is based neither on growth nor a hypothetical predictive performance.

On a quantitative basis, the existence of a bubble is not justified by the level, far from excessive valuations, or the dividend yield.

Recently, the Chinese growth and higher inflation expectations have led investors to fear a cycle of monetary tightening more aggressively than expected. Despite good economic statistics more and more analysts are concerned about the situation in China. Investors pessimistic crystallize their attention on China and often compare a hypothetical bubble Chinese Japanese bubble of the late 1980s. Indeed, the Japanese case is interesting because it is the latest example of the structural development of a country that has finally burst the bubble.

Can we baptize China the "new Japan"? In terms of valuations, the PEX 2010, Chinese A shares is estimated at about 18 now, against 70 in Japan during the bubble of the 1980s.

They talk about real estate bubble in China ...

The living space of urban Chinese has increased rapidly, reaching a level close to that of Singapore or Japan (30 m2 per capita). However, property investments are expected in cities: 200 million Chinese migrant workers and renovations are needed on the flats had been built hastily in the early 1980s.

In terms of access to housing, the ratio of the average price of a home divided by the annual income of a household is 10 in China (compared to 4 / 5 in most developed economies and 18 in Japan in 1990 ). Based on income buyers, the ratio is close to that of a developed economy. The main problem is that the offer was for the premium segment while the needs of the general public are not satisfied. In 2010, property investment should remain strong, with growth in double digits. The government has taken measures to curb speculation: limit the ratio of debt buyers, improving bank risk management, increased supply of land and property in smaller cities and housing supply good market.

The risk of Chinese real estate sector is also limited by the method of financing property purchases: the price increase has been fueled by credit expansion, real estate is mostly financed by savings (1 / 4 buyers do not rely on debt).

The risk of formation of a bubble in Chinese real estate market is real but the bubble is far from being effective, it is the Chinese government to manage that risk to prevent the drift of prices. On the other hand, property values have already been corrected and a lot of negative news is already incorporated.

What concerns about the risk of overcapacity?

The risk of overcapacity is another problem China, highlighted by the most pessimistic. Investment in fixed assets accounted for 47% of GDP last year. China overinvestment and wasted it does? The country boasts of having registered the highest growth in twenty years of the variable total factor productivity (TFP). If China was as wasted as the Soviet Union, developments in productivity would be negative. Even in sectors with overcapacity, like steel, the country still operating at a capacity of 72% last year down cycle. In infrastructure, when compared with the situation in the United States a century ago, China, whose area is the same but whose population is three times greater, have 110 000 km of railways by 2010, against 400 000 in America in 1916.

Another way of looking at things is that overcapacity China affects the rest of the world. China is competitive, and markets are increasingly globalized, open a new factory in China will create excess capacity elsewhere in the world, in a country less competitive.

The main risk we identify currently China is the evolution of the U.S. dollar and the increased risk aversion, due to fears by the indebtedness of the states.

The housing market will remain convalescent professional in 2010

The time has not yet resumed and real estate professionals are still in phase of sobering after the euphoria of the years 2007 and 2008. With 18 000 visitors, the crowds at the 21st edition of the international market for real estate (MIPIM), Cannes, from March 16 to 19, was half that in 2008 a record year, and comparable to 2009.

The British and Russian delegations have been significantly reduced, the presence of the Middle East is almost symbolic and the absence of the Spaniards noticed. Attendance at MIPIM is a barometer of the health of the global real estate industry which, since 2008, acknowledged a serious decline. No resounding failure - even if the land Orco Property, very invested in the countries of Central Europe, and under the safeguard procedure, laid off 500 people - but a crisis for low noise, which undermines the morale and projects. A survey from the Royal Institution of Chartered Surveyors, conducted among 1 200 professionals, reveals that 11% of them have lost their jobs over the last twelve months.

The profession hopes that 2010 will be the year of stabilization, before restarting. The consulting firm Cushman & Wakefield predicts for 2010, a rebound of 30% investment in the world is 478 billion dollars, against 362 billion in 2009, a performance especially indebted to Asia. In France, twenty investors surveyed by Investment Property Data in February that provide 11 billion euros will go this year to commercial real estate (cons 7.6 billion in 2009 and 27 billion in 2007). For it is not money that is missing, as in some investors and banks, which begin to pay a reasonable to very low rates and up to 60% of the value of buildings (75% against it two years ago). The insurers have capital to invest. This is the case of Olivier Piani, Allianz Real Estate Europe, said that having 2 billion euros to invest in France, Germany and Italy. It would be acquiring the entire property Capital 8, former head of EDF in the 8th arrondissement of Paris.

UNCERTAINTIES

The fund manager AEW Europe has 3.5 billion euros and UFG 700 million euros, while German open funds themselves, collected 3.2 billion euros net. "The downside is that all these players looking for the same thing: beautiful buildings well located and secure rents, which leads to rising prices," notes Philippe Depoux, Property Manager of Generali France. The money is there, then, but not the love of risk.

Owners of office buildings, concerned about securing their future revenue, were granted to tenants of rent rebates and still expect to decline in 2010, about 7% after 15% in 2009. The concern is shared about the premises, some tenants accuse declines in sales of 10%.

Uncertainty equally among bankers, some not recover their bets in the volume of funds they have in recent years, awarded to real estate (970 billion euros across Europe). These "distressed assets" are present in Spain, looming in the U.S., but still rare in France.

While many buy and sell his property

"The exclusive mandate allows the agency to be alone for 3 months, to offer your property for sale. If you have another agency that you have found an acquirer or an interested person who does not want to go through the agency, you can not sell him. Estate agency has concluded an exclusive mandate is therefore the only advantage. Indeed, it has 3 months before her to sell the property without any warranty. This method is not really appropriate, but it remains widely used in business names as attractive: term privilege mandate of trust, money premium, etc.. We must also take into account that if you do not denounce the exclusive mandate to the end of its initial period, it is extended to 12 months! The exclusive agency is reducing its chances of selling ...

However, entrusting his property with a simple mandate, that is to say, without exclusivity, it's another chance to sell. The ideal is to target 2 or 3 additional agencies: 2 area agencies and an agency more oriented web example, and take the cheapest. We must understand that you will not maximize the sale of your apartment or your house by putting it in 6 or 7 agencies, which will commission more or less. In addition, the buyer mentality has changed and even if a number to be interested, they are more willing to buy at any price. "
The agency commission: Insist on transparency

"The commission is the compensation that will allow himself to an agency you have found a buyer. It is necessarily stated as a percentage of agencies in the window. Do not hesitate to ask precisely the amount in euros. An agency that remains unclear about this is not a good sign. Take care that the commission will be required to be in line with services offered by your estate agent. Before choosing the agency, do not hesitate to compare several. And please note that the higher the commission is low, most logically the sale price (including ISPs) and then decrease, the greater your chances of selling quickly. "

To buy
Target your needs

"When you are considering buying a house or apartment, it is advisable to draft a list of all the essential criteria on which you will not make concessions and indicate clearly your real estate agent: location, travel time from school work area, number of bedrooms, proximity to shops, etc.. This will avoid multiple unnecessary visits and optimize your time. You can also consider a second list of criteria that are more comfort. Warning to avoid falling into the extreme and being in search of "sheep to 5 feet", be realistic and remember to take into account market realities. Indeed, it must be able to be attentive to your real estate advisor and sometimes to hear some truths of incompatible standards. "
Confirm obtaining your loan upstream from a trained counselor

"To avoid any unpleasant surprises when signing the sales agreement, please seek advice from a financial advisor. It has an objective view of the banking market and may choose such a bank rather than another in your own interest. "
Do research on the Internet

"Today the Internet is a great place in our lives every day, it also applies to searches of property. Many agencies that pass through this particular platforms as seloger.com estate. It is so rare to see by the same property at different rates indicated. This will contact the agency that has the best price. But be careful, because some do not take into account their commission, so do not hesitate to re-specify them when you contact them.

And even when you are in negotiation phase when you find the property you like, do not hesitate to have another little Internet research on these platforms. It is not impossible to see the price being negotiated is not the lowest, and that other agencies offer the same goods cheaper! "

Switzerland: the most expensive real estate in the world

Switzerland is the most expensive country in the world in regard to housing, according to a survey taken in 2009 ERA Real Estate by laTribune.fr. The average house price stood at 348,000 euros at national level, while the rate of ownership of 37.5% is one of the lowest in Europe.

Ireland has the second ranking with an average price of homes for 259,098 euros, followed by France, in third place, with homes worth an average of 255,780 euros at the national level.
Despite higher house prices, Ireland has a rate of owners of 72% against 58% in France.

Lower prices ends

Since 2007, the poster of the estate is Back to the Future every night: it is three years after a decade of crazy up the stone market is a radical return to the past. Several months of falling prices, falling volumes of transactions and loans have been falling to its level in late 2005. But we got to the end of the film in major cities, the decline in sales, and price, is behind us.
For the moment, nothing noticeable yet in official statistics. It was not until December to have confirmation that the decline is over. In late 2006, already, while the data were not available, Challenges took the risk to announce, with two months in advance, the end of the price increase in headline: "The summit is reached.
If Challenges take the lead, is that in this sector, data are very long to collect (see interview below cons). The most reliable, those of notaries have between three and five months behind reality. Suffice to say that when they are exploited long ago that the market no longer reflects the image they give in! Now say that these statistics are available? That market remains depressed, as trading volumes drop by 30% over one year and that prices should fall by 8 to 9% over 2009, annual rate, after declining 10% last year.

Recovery started
By going on field interviewing individuals that are performing operations, questioning the real estate agents, solicitors, developers and bankers, we found a different landscape: the activity has already been restarted a few months.
Certainly, in the outskirts of towns in the country, "the situation remains tense, with declines ranging up to 20% in two years," says Christopher Pinault, Director General of the Credit Foncier. But elsewhere, in the most vibrant market, prices have declined steadily. And in some areas in Paris intra-muros, in its suburbs in the inner cities of the province, they begin to recover.
In Paris, for example, prices rose 3.5% over the last three months. And in Courbevoie, Hauts-de-Seine, "the buyers have regained confidence at some point decide to buy before they sold," explains Fabrice Cochet, head of the Agence de la Gare. A few miles away at Asnieres, Thierry Gondouin, Guy Network Hiccups, made the same observation: "The demand is strong, we lack today of goods to sell."
The recovery also affects the downtowns of several major cities. In Lyon, between the Saône and Rhône, Fnaim observed since July, a sharp increase in the number of transactions, and even higher prices. In September, rates for the former Lyon have increased by 1% and even 3.6% if compared to prices last winter. Ditto for the new, which shows prices up 5% over the year to 3 640 euros per m2 on average.

Request reassured
In Marseilles, the increase is less straightforward, but since the turn of the summer, demand picked up again. This does not mean that potential purchasers are buying anything at any price: they must see a real drop in prices in a neighborhood they decide to return. Many sellers have not yet understood. In Rennes, for example, they are "too greedy", sorry Eric Robiolle in its Lices Agency, which continues to discourage potential buyers, but many ...
Bernard Cadeau, president Orpi, see also, throughout its network, a return of buyers. "We wanted to remain cautious at first, but it is now confirmed: the market wakes up. Moreover, some of our agencies have made in July and August its best sales since opening. "Wet Michel, professor at Paris X-Nanterre and connoisseur of the industry, confirms this:" Prices have been falling early in the second quarter. We will see in January when we have statistics notaries, says he. These show that between the second and third quarter of this year's activity has sharply increased, probably over 15%. "This is not a flash in the pan: for Christopher Pinault, the Credit Foncier, 'increasing needs, coupled with lower stocks of new goods and a decrease of homes coming onto the market will necessarily lead to increased demand in the former. "

Credit revived
The reasons for the return of buyers are partly psychological. "They found the expected decline has not arrived. As the financial crisis seems over, they have recovered to make plans. And we saw them back in our study, analysis master Robert Panhard, notary in Paris.
But the return of buyers is also due for a real estate agent in Paris called "double" effect Kiss Cool "of real estate: a layer of lower prices and a layer of lower lending rates" ... For the improvement on the credit front is spectacular. Last year, banks were holding tightly to tap their credit. But since the summer, they have wide open. As Patrick Werner, CEO of La Banque Postale, the only bank that had continued to pay during the period, "it is not we who have changed their policy, they are our competitors!".
A change is explained: after their misadventures in the financial markets, banks have turned in their traditional clientele of individuals. They struggle to attract new customers. Moreover, adds Joel Boumendil, CEO of ACE, mortgage broker, "they realize they will struggle to achieve their business objectives in credits before the end of the year. So they are working extra hard. " And borrowers benefit. "In September, says Sandrine ALLONIA, design manager of online broker Meilleurtaux.com, we have registered some 50,000 applications for credit, against 38,000 in 2008 and 40 000 the previous year, before the real estate crisis. And the situation in October was interviewed on the same model. "
Banking institutions are more lenders to borrow themselves cheap. Result: their lending rates had their biggest drop since ... fifteen years, falling to 3.95% on average (see p. 90, credit conditions for banks). For Geoffroy Bragadir, spokesman Empruntis.com loan broker, "it is difficult to imagine the effect this fall on borrowers, but one year power purchase real estate seems to have improved Deplus 20 %.
An example: BNP Paribas offers for a loan of 200 000 over fifteen years, 3.84%. In our number "Featured Property" Fan last, at the same time, the rate for the same loan was 5.25%. In one year, the bank has lowered its offer by 1.4 points. The effect on interest is spectacular. In the first case, our borrower pays more than 73,300 euros in interest over the term of the loan. In the second, it should more than 99,300. In one year, it saved 26,000 euros in interest!
The gain in purchasing power is even more important taking into account the lower price. Imagine a couple who could repay, in 1998, a monthly payment of 1,500 euros. This couple could have time to pay the equivalent of the monthly payment, an accommodation of 184 m2. In late 2007, given rising prices and soaring interest rates, its purchasing power had fallen in m2 to 79 m2, two times less than in 1999. This year, it increased to 93 m2. This means that in one year lower rates and lower prices have combined to enable him to afford additional 14 m2.
Even with a smaller budget, this increase in purchasing power is significant. Of Toulouse, for example, which last year had a capacity of monthly payment of 1,000 euros, 150,000 could borrow euros and buy a 3-rooms (54 m2 exactly) to 2 790 euros per m2. Today, these same Toulouse can borrow EUR 166000 and buy a 4-rooms of 65 m2 (in 2497 euros per m2) ...
In nine, this effect is accentuated because the buyers will benefit from several additional aid: VAT at 5.5% (against 19.6% in the former) in some neighborhoods, the Pass-land, the loan helped to buy the land then the walls and finally the zero-interest loan, which covers about 60% of buyers and the amount is doubled until mid-2010. "By adding these measures to lower prices and interest rates, the gain in purchasing power of buyers in the new can reach 50%," said Olivier Mitterrand, CEO of developer The New Builders, which expects sales in 2009 higher sales in 2007.

Coeur market blocked
This does not mean that all problems that have caused the collapse in sales two years ago have disappeared. The main point of concern, analysis Sebastien de Lafond, CEO Meilleursagents.com, "is that the natural heart of the market, the family home, remains blocked because the middle classes are reluctant to return." A heart that still represents more than 100,000 transactions each year. So, for now, says Christian Musset, President Cogedim Sale, "the market is very concentrated on help (first-time buyers) and the very wealthy."
Why the middle classes are reluctant to buy? Just because they are, mostly, selling their property before buying another. But banks have opened the floodgates of credit, but careful not those of the closed bridge loan. The Second-time buyers (those who sell before you buy) will probably not many for some time. For Laurent Vimont, president of Century 21, this is changing: "In one quarter, says he, the number of buyers increased by 21% nationally and 35% on Paris."
But competitors do not detect tremor: the real estate market of the family home will probably be the last to unjam in France. For it is released, observes Olivier Mitterrand, "should be an economic recovery, particularly a decline in unemployment." But that is another story.

Rising house prices slows further sleeve

According to the "Nationwide Building Society, house prices in the United Kingdom rose by 0.4% in October, leading to an annual gain of 2.0%, the first positive reading since March 2008. Prices had risen 0.9% in September. "The sharp rise in house prices seen over the summer showed some signs of moderation since early fall," said Martin Gahbauer, chief economist at Nationwide. "It seems that the actual inflation of housing prices has changed somewhat ahead of consumer expectations. This could signal a period of moderate inflation of housing prices to come," says Gahbauer.

Real Estate : the crisis is not over and threatens the entire economy

When the building goes, everything is said to be for ages. Problem: the building may go from bad to worse! The housing crisis, which had led first by blocking the resale market, has now reached that of the primary assumption, which survives only through zero-interest loan. But this market is mainly that of new construction, that stings the nose already. The developers are not stupid: they thought they saw the end of the tunnel with the recovery of this small mid-2009 - how not to go when one has fallen so low! - They also know that not to be confused with the output entry. A protracted crisis in the ninth, the entire construction sector and industry of construction materials is threatened heavyweight in the global economy, while none are affected only areas of the furniture, removal, diagnosis, estate agents, notaries and ...