Mon, 24 Jul 06
Commercial real estate markets around the world have become increasingly transparent over the past two years, according to Jones Lang LaSalle’s 2006 Real Estate Transparency Index, a ranking of real estate market transparency in 56 countries and territories.
“Since the first publication of the Jones Lang LaSalle Real Estate Transparency index in 1999, we have charted gradual improvement in a number of transparency measures, but progress has been especially rapid in the two years since we last produced the index,” said Jacques Gordon, LaSalle Investment Management’s Global Investment Strategist.
Gordon continued: “Overall, two-thirds of the countries ranked in our 2004 survey exhibited some or significant improvement. Some 14 countries moved up a full tier in our five-tier transparency ranking system and none slipped back. Additionally, many more countries earned higher transparency scores while remaining in the same tier.”
He added: “Improvements can be observed in several different dimensions of transparency. Among the greatest sources of improvement are the introduction of new investment performance benchmarks, more financial disclosure by listed real estate companies and heightened external governance of these listed companies. That said, there has been slow progress in the legal and regulatory categories — two areas of great interest to investors and occupiers.”
Australia, the United States and New Zealand take the top spots as most transparent companies, followed closely by Canada and the United Kingdom. With exemplary underlying legal and regulatory factors, these countries serve as role models in their respective regions.
In this year’s survey, 23 countries rank as highly transparent or transparent, up from 21 countries earning the same designation two years ago. In 2006, 10 countries ranked as highly transparent, compared with six in 2004.
Highly transparent countries for the first time in 2006 are Hong Kong, Sweden, France and Singapore, each having jumped to Tier 1 from Tier 2 since the 2004 survey. France and Sweden were buoyed by long-time series investment performance indices, readily available market fundamentals data, strong accounting standards and disclosure regimes, consistently applied regulations, strong legal frameworks and high professional standards.
Hong Kong and Singapore were helped by their ability to meet global improvements in accounting standards and governance and more publicly reported property information. Mexico and the United Arab Emirates also exhibited significant improvement, although they remained in the same tier as they were two years ago.
The Index ranks Vietnam, Venezuela and Egypt as the least transparent real estate markets surveyed.
Asia Pacific region
In Asia Pacific, there has been marked improvement, with more than half of the countries studied in the region moving up the real estate transparency tiers.
“The global focus on accounting standards has impacted many countries, including those in Asia Pacific,” notes Dr Jane Murray, Head of Research, Asia Pacific at Jones Lang LaSalle. “The opening up of many Asian markets to international competition has accelerated both the adoption of global practices and publication of market information in English.”
Japan and India exhibited the greatest transparency improvement, each moving up a transparency tier. Japan, which improved from semi-transparent to the lower end of the transparency tier, was bolstered by the availability of market information, improvements in taxation transparency and the enforceability of contracts. India’s improvement from low- to semi-transparent was helped by the availability of market information, improved general accounting and reporting processes, and substantial improvement among market participants about the legal process that relate to contract enforcement and legal relief.
Europe, the Middle East and Africa
“While there has been little significant movement in the transparency rankings of the more mature markets across Europe, the Middle East and Africa regions, there has been greater improvement in the less mature markets,” said Paul Richards, Director, Strategy and Research for Jones Lang LaSalle.
While a number of mature markets jumped tiers (France and Sweden from transparent to highly transparent, and Portugal and Italy from semi-transparent to transparent), few have seen dramatic changes in either the availability of market information or in legal and planning services.
With the exception of Greece, pre-accession EU members, as well as Switzerland and Norway, are now considered transparent. These markets are characterized as having medium-length time-series investment performance indices, readily available data on market fundamentals, strong accounting standards and disclosure regimes, consistently applied regulations, strong legal frameworks and high professional standards. Some markets lack financial information in English. Greece still lacks an accessible land registry or reliable performance indices and has poor data on market fundamentals.
South Africa is the only transparent non-European real estate market in Europe, Middle East and Africa. Its market has robust investment performance indices, strong regulatory and legal infrastructures, efficient transaction processes and high professional standards.
The Middle Eastern region saw transparency improvements across all markets, although Israel remains the only semi-transparent market. The strongest improvers are the United Arab Emirates and Saudi Arabia, where governments have become increasingly business and investment friendly and have exhibited improvements in accounting, legal and regulatory frameworks.
North and South America
North and South American countries improved their transparency scores over the past two years. High transparency in the US is an important contributor to the record inflows of cross-border capital to the country over the last two years. When new transparency factors (added in 2006) are taken into account, Mexico showed the most improvement in the region, as its transparency score moved up from a low Tier 3 country in 2004 to a high Tier 3 score in 2006. These factors include the availability of property information in the transaction process and the professionalism of real estate agents.
Brazil and Argentina made the most improvement in 2006, each jumping from Tier 4 to Tier 3. Brazil benefited from improvement in the availability of market fundamental data, while Argentina was helped by improved transparency in the governance of publicly listed real estate vehicles. Both countries also were helped by improved transparency of planning and building codes and eminent domain policies.
To see the full Jones Lang LaSalle Global Real Estate Transparency Index 2006, please visit http://www.joneslanglasalle.com/en-GB/research/researchabstract?artid=2452
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