The Lex
Shanghai's vibrant city centre is reaching giddy heights. More than 4,000 buildings soar past the 100-metre mark; top-end property prices are rising by about 5 per cent a month; and office rentals are almost on a par with New York. The emergence of arsonists and thugs picking off residents who refuse to make way for big developments adds to the sector's bubble credentials.
Fundamentals and speculation are driving the market. Like pre-bubble Hong Kong, supply is tight. Meantime, an influx of foreigners and rural migrants is swelling the population: the number of urban households is projected to rise 17 per cent to 6.25m by 2010, according to Asian Demographics. But there is also hot money chasing renminbi appreciation in the luxury sector, an estimated 40 per cent of buyers are foreign. Locals, facing miserable returns on savings and equities, are also opting for bricks and mortar.
Wage rises are failing to keep pace. Affordability has deteriorated by about 40 per cent since 2001. Relative to income, house prices are three times western levels. That looks like a bubble, a fear shared by the authorities which are clamping down with capital gains taxes. Not atypically for China, other arms of the state are moving in the opposite direction: the Supreme Court has ruled that banks cannot seize the primary residence of defaulters. Since mortgages account for nearly half of all medium and long-term credit, the banking
sector looks vulnerable when this bubble pops. US inflationThe seed fell on fertile ground. A day after the US Federal Reserve put investors on inflation alert, consumer price rises for February came out stronger than expected. Yields on 10-year Treasuries initially continued their long-overdue rise towards 5 per cent from 4 per cent last month before settling.
In isolation, yesterday's figures were not as alarming as they first appeared. The monthly rise of 0.3 per cent in core consumer prices owed much to rounding. The real figure was 0.251 per cent. A figure of 0.249 per cent would have been rounded down to 0.2 per cent and probably would not have unnerved the markets. Also, much of the increase was from rising healthcare costs and housing. There still appears to be limited feed-through into core consumer price inflation from high energy prices. Still, inflation is creeping higher from the lows of late 2003. There is a risk that the Fed finds itself behind the curve. Interest rates remain low. It is feasible they will have to rise not just to a neutral level but beyond if inflation gathers pace. For now, however, the added uncertainty the Fed has injected into the interest rate outlook through comments on inflation is healthy. At last, financial conditions have started to tighten, with bond yields, for example, rising. Before, investors had largely ignored the Fed's rate rises and taken on excessive levels of risk. Now that the Fed is less predictable, its moves will start having a more powerful effect on markets and the real economy.Luxury goods makersIn sophisticated settings, it is considered bad manners to pull out a fancy watch merely to display it. Luxury goods makers have long been similarly finicky, always finding more noble uses for the bulk of their riches than returning cash to shareholders. Increased pay-outs from Bulgari and Swatch are the latest sign that attitudes are changing. This is welcome and not only because it reduces the scope for big acquisitions. Higher dividends in particular could also lend some credence to the claims by luxury goods makers that cash generation is improving.
After last year's tax controversy, Swatch needs to try harder than most. The Swiss watchmaker faces a renewed onslaught from Asian rivals on its Swatch and Flik Flak brands. So far, progress at its luxury watches has barely outweighed margin pressures on these mass market labels. With currencies likely to remain a drag, underpinning its bullish outlook with a bit of cash makes sense. The catch is that pay-outs remain modest. At Bulgari, a doubling of the dividend takes the yield from an insulting to a merely miserly level of 2.4 per cent, while its disappointing results illustrate that organic growth still comes at a steep price in luxuries. At Swatch, cash returns will total 3.7 per cent, but, again, the bulk is coming via fickle buybacks. Even worse, that already corresponds to most of the cash it is likely to generate this year. In absolute terms, at least, its valuation remains rather posh. German economyNobody expects Germany's depressed consumers to revive the eurozone's perennial economic laggard. Instead, investors have been banking on rising corporate investment, underpinned by exports and a fairly buoyant stock market. However, those hopes took a hard knock yesterday: German business confidence is at an 18-month low, after a fall in the March survey from Munich's Ifo Institute.
The reasons are not hard to find: a strong euro, soaring oil prices and gloomy headlines at home. It all adds up to a tough 2005. Consensus forecasts for Germany's economic growth have been dropping steadily and are down to 1-1.2 per cent for this year compared with 1.6 per cent last year. So much for the cyclical recovery.
The hope remains that better corporate performance will translate into new jobs, perhaps sufficiently to lift economic growth to 1.8 per cent in 2006. The government has done some of the right things. However, more micro-economic restructuring is needed and the omens are not good. Revealingly, Germany supported this week's French efforts to water down the European services directive. Last week saw a lukewarm domestic response to Berlin's proposals to cut corporation tax. Most important of all, there is little serious initiative for further labour market reforms. So far, consumers have seen much pain and little gain. They can only hope that the latest Ifo reading proves a blip.
Lex专栏：上海的地产泡沫
上海充满活力的市中心正在达到令人眩目的高度。这里耸立着逾4000幢高度超过100米的大楼；高端市场的房产价格以每月约5%的速度上涨；而写字楼的租金几乎与纽约不相上下。该行业泡沫的另一个佐证是：在开发大型项目时，竟有纵火犯和暴徒对拒绝拆迁的居民动用暴力。
基本面和投机两方面因素都在推动这个市场。与泡沫破裂前的香港一样，上海中心城区的房产供应非常紧张。同时，外国人和农村移民的涌入令人口进一步膨胀。据亚洲人口统计(Asian Demographics)预计，到2010年上海的城镇居民家庭数量将上升17%，达625万户。现在上海豪华房地产市场上也有热钱涌入，试图从人民币升值中渔利。据估计，在上海高档房产市场，40%的买主是境外人士。由于储蓄及证券投资回报非常糟糕，上海本地人也选择投资房地产。
工资涨幅跟不上房产价格的上涨步伐。自2001年以来，住房支付能力(Affordability)已恶化了约40%。相对于收入，上海的住房价格大约是西方国家水准的三倍。这看起来像是个泡沫，当局也有这样的担心，它们正利用资本收益税来压制房价涨幅。而国家的其它部门却在采取相反的措施：最高人民法院规定，银行不能没收房屋贷款拖欠者的第一套住宅。对于中国来说，这种现象也算不上不正常。由于住房按揭贷款占银行所有中长期贷款的将近一半，因此当泡沫破裂时，银行业看来将很容易受到冲击。
Lex专栏是由FT评论家联合撰写的短评，对全球经济与商业进行精辟分析。
