Where should not invest money?

09.09.2010 10:44
Articles about real estate | Where should not invest money? Experts MPP Consulting Group published a new quarterly ranking of the most risky investments in Ukraine.
In the second quarter of 2010 in the "top-end" top five were: land, real estate, construction, banking and retail.

We bypassed expensive tenth

Related article: In November, the volume of investment in luxury real estate in Kiev amounted to $ 16 million

According to Goskomstat, in the first half of this year in Ukraine's economy by foreign investors opened 1,782 million (of which in the first quarter of 717 million dollars), representing only 66% from the same period last year. Net increase in foreign capital in January-June 2010 amounted to 1 248.8 million: investors have invested a 782.8 million dollars, were seized - 534.0 million

Such negative dynamics of foreign capital in Ukraine becomes tendentious character. We can say that investors have to bypass Ukraine tenth road.

In 2009, we saw a similar picture. Net increase in total foreign capital in Ukraine's economy in 2009 totaled 4.41 billion dollars, which is 27,4% less than in 2008 (last year, foreign investors have invested in the economy of Ukraine 5.635 billion dollars, but simultaneously seized 0.941 billion dollars).

The same Goskomstat reports that have grown considerably amounts of foreign capital into the country primarily due to countries such as Russia and Cyprus. At the same time through the sale of equity by non-residents from other countries and disinvestment significantly decreased the volume of capital investment from the U.S., Britain and other countries.

Invest and Ukraine. However, according to official statistical bodies of 629 million dollars of direct investment the majority (as in the past year) aims to become an almost native Cyprus.

It is generally accepted that investors mainly invest in those countries, industries and enterprises where the expect to get the maximum profit at minimum risks.

If in any country there are just laws, effectively the economy, the tax system is simple, fair and aimed at creating a just and prosperous middle class, the investment grow. For example, in such a relatively small country like Poland, even in the crisis year of 2009 investments are estimated at 8 billion euros.

If there is any legislation is imperfect, rampant corruption, restraint in raiding, guarantees the rights of investors are small, despite the high expected profit, capital is not coming.

For a long sad tradition, Ukraine in the ranking of the attractiveness of doing business is far from the mark. Only 143 out of 183 in the list. According to the rating, it is easier to do business in Russia, Slovakia, Hungary, Poland, Belarus and Azerbaijan, in a word in nearly all post-Soviet and post-socialist countries.

Foreign direct investment (FDI) in the world is measured in trillions of dollars. This huge flow bypasses Ukraine party.

However, with the rankings of risky investments in Ukraine, obviously, takes into account not only the general economic background of a huge, inefficient and extremely expensive bureaucracy, the state is extremely predynsultnoe enegrozatratnoy economy and antiquated infrastructure, lack of a clear development strategy, increasing the debt burden as corporations and businesses, and the state in general and the risk of default is internal to the subjects of economy and social sphere.

Certainly been taken into account and the two major problems that have become the detonator of the first wave of the crisis in Ukraine. They are still not resolved, and carry risks not just for business and investment in the country, but also for the national economy as a whole. For example, in Ukraine still feel bad blisters on the land and property market, and grows a huge overhang of bad assets in the banking sector.

Earth: diagnosis - "bubble", the recipe - do not buy

In the first place a top five risks earth. During 2010, the land is the clear leader in the rankings, and in the future will hold the palm for a long time. Inadequate pricing of recent years has led to the fact that this market was created a pyramid scheme, which was kept only because of the constant rise in prices. Any pyramid sooner or later doomed to fall. The cost of land in the most "overheated" 30-kilometer zone of Kiev in recent slide down at an average rate of 3% per month. And the final point to stop this trend has not yet seen as investing in a falling market so quickly is almost no one dares. According to the company SV Development, the average cost of land in the suburb of Kiev under the cottage building with a peak fall of 2008 in 6692 dollars per hundred square meters as of 08/23/2010, the flew up to 3,987 dollars per hundred square meters (including the most expensive Kiev Svyatoshinsky area with 10,404 to 6,603 dollars per hundred square meters).

Characteristically, as the real estate market in the wake of post-election business optimism land market moved upward, the maximum amplitude correction was achieved in April this year. But since both markets are looking extremely confident down, and sellers were forced to deploy a real hunt for the rare buyers of land and apartments.

Purchase a small plot of land in the 12 hectare in 30 kilometers from Kiev for an amount slightly more than 50 thousand USD, in the cottage with luxurious own infrastructure, security and lighting in the area with landscaping and water landscaping, and you definitely will give vacation in Tunisia, the UAE or the Maldives.

Apartments and offices at current prices, nobody wants

Among the leaders of the "failed" investment now in second place residential and commercial real estate. Although apartment prices have experienced a collapse. The first landslide ...

In economy class, every square meter on average, lost thousands of dollars. The fact that even in the summer of 2008, worth $ 2500 dollars for "square" is now worth 1,500 of the same currency, something that was worth three thousand dollars (yes, we recall, was estimated meter "killed" the panels in Rusanovka) now proposed for 2 thousand dollars

But the problem is that prices for such feel better now, almost no one buys.

True, the staff and leadership of one of the largest real estate companies in Kiev stubbornly continue to insist that the number of deals is they just rolls over and metropolitan BTI storm thousands of Kiev, ever since the night holding places in line to register the sale transaction. Such statements in the comments, in principle, not need, and only reduce the credibility of the firm, so frankly hang noodles on the ears of potential buyers and sellers of real estate capital.

Among the factors that as for the land and confirm the diagnosis - a "bubble", and the recipe - do not buy, are the increase in the cost of the housing (the notorious gas drags along the rising cost of heat and water), falling living standards of middle-class country, worsening climate for conducting small-and medium-sized businesses, the continuing debate about the desirability of introducing a property tax, the planned tightening of the taxation of landlords (why profitability index of investment apartments even fall), presence of a huge overhang of collateral from financial institutions.

Finally, after two years of crisis, "old" stocks of money from businesses and people still come to an end, so when the prices of housing and offices has finally come to an adequate rate, potential buyers will be quite small.

Among the factors supporting the diagnosis for the commercial real estate purchase only in special cases - reducing the profitability of private enterprises, increasing the administrative burden on them, higher vacant (unoccupied) areas of profitable, the potential for only 20-25-year return on most of the facilities through lease .

Already in July of this year on the market of Kiev has received new offices at a price 10% below-market counterparts, but at a "cheap" commodity demand is virtually zero.

Construction and corruption. Who's who?

The three "winners" of the investment risks in Ukraine - the industry is directly related to the temperature of land and real estate - construction. Oversupply, high competition in the market, lack of transparency and corruption-thick coating on the stages of land allocation and the negotiation procedures - factors that make the construction industry still can not come down from the crisis and remains risky for investments. In January-July 2010 statistics records 16.7% drop in industry decline has occurred in virtually all types of major construction works. In addition, stocks of unsold apartments and commercial spaces are many, as even the unprecedented action in Kiev, such as "10% down payment and interest-free installment plan," "Annual rents at present," "The brick house at 300 meters from the underground with a 30 per cent (!) discount, "etc. do not help to lure buyers.

Banks collectors of rusting cars and dilapidated apartments

In fourth place ranking banking. This year, the surviving banks are partially restored the confidence of citizens and legal persons who witness the constantly growing base of deposits and the amounts in current accounts. Nevertheless, the biggest problem the industry are accumulated the bad assets, whose share is growing, and thereby deprive any illusions about the rainbow and serene out the financial sector crisis.

However, the shaft and returning from the bags of cash savings of the population does not inspire optimism, one hundred percent. Indeed, in the case of any exchange of instability in the absence of a law prohibiting early termination of deposit agreements, the actions of investors to predict difficult.

Especially not yet solved the problem of one of the largest banks in the country. Thousands of depositors are denied the right to access their deposits, despite the fact that the amount of NBU refinancing (if that money does not dissolve is not known where) would be more than enough to meet all the demands of citizens.

Not solved the problem of short-term liabilities and long assets. Of the funds allocated for a month with a prolongation, sometimes loans are issued for many years.

Some banks recently have placed enticing advertisements for loans in UAH at 17-something percent, again trying to shoulder all the risks to the borrower, because in terms of the contract in the event of an increase deposit rates will automatically rise and the rate of the loan. However, to become the owner of dubious credit for the purchase of an ordinary old kopeck piece in a sleeping city needed a "white" household income of no less than 20 thousand hryvnia per month, while another 50% in advance of the price at the expense of personal savings. For twenty years, borrowed money will have to return the bank to double (the mortgage for the classic scheme), and even in the treble (the mortgage of an annuity). Domestic banks are trying to shove the borrower "happiness in Ukrainian."

In any event, the pilgrimage to the banks for loans to start another soon, to the spread of mass consumer lending in Ukraine can only result in tangible gains in the economy.

Remains open and question the fate of numerous bank liens. Cars rust, residential and nonresidential facilities wear out, but banks do not expect to throw off ballast, putting all his "good" prices are significantly higher than the market. Until that liquidity problems were solved mainly due to a strong inflow of fresh deposits, but the imbalances in the banking system is increasing, and sooner or later, with ballast something will have to do.

Retail unattractive

Closes the five retail investment risks. The strategy of rapid growth in recent years has led to the establishment of retail outlets and complexes, which were unused during the downturn in consumer demand. Recall, retail sales, retail trade and restaurant business in Ukraine in 2009 decreased by 20,6% compared with 2008, and in the current year, played only a "penny" - In January-July 2010 compared to same period in 2009 On an increase of 3,9%.

Ukraine has lost its investment attractiveness in the eyes of the world riteylerskih networks. Once in 2006, the year in fourth place, and in 2007, the year in fifth place in the list of most attractive regions according to consulting firm AT Kearney (The Global Retail Development Index), this year the country was not included even in the top thirty.

Experts have not yet noticed that life in Ukraine has become better and more fun. " Lack of Ukraine on the list due to falling consumer demand, poor infrastructure, excessive bureaucracy, political instability, relatively high inflation and devaluation of the hryvnia. Today, investment in the purchase of retail facilities is a fairly significant risks, however, the creation of new outlets or networks poses even greater dangers that proved numerous bankruptcies of trading companies across the country.

The crisis has left. Long live the crisis?

Now the country's unfashionable to use the word "crisis" (though the word "innovation" as well). And even one of the leading economic journals has removed the traditional slogan of the crisis with their skins, arguing that time is two consecutive quarters Ukrainian economy is showing growth (plus 6.5% in the first half of the fall minus 15.1% last year) hence we can speak about the crisis in the past tense.

Here are some state officials began buying doroguschy car for low money. They probably also believe that the crisis has evaporated.

However, the real situation in the economy belies the illusion. And all most of the population expects the deepening crisis and related problems (primarily related to fears of inflationary trends in the autumn).

A swollen unprecedented for sale and rent specialized advertising publications, bankrotyaschiesya businesses departing down the car market and billions of dollars in breaks in the budget suggest that while these risks for Ukraine, for investment, business, may not yet started ...

Vadim Brovko, Sergei SLEDZ "Mirror of the Week"

Content tags: Investments Property land
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