JEDDAH – Recovering real estate markets have prompted renewed impetus to transparency improvements following a slowdown in progress during the financial crisis in 2008 and 2009, a biennial index released Wednesday by Jones Lang LaSalle and LaSalle Investment Management revealed.
The report said nearly 90 percent of markets have registered advances in real estate transparency during the past two years, driven by improving market fundamentals data and performance measurement, combined with better governance of listed vehicles.
While some improvements have been recorded since 2010, the Middle East and Africa remains the least transparent of the 4 global regions covered in the Index. Areas where the MEA region scores particularly poorly include the lack of investment performances indices and the lack of available data on market fundamentals.
The pace of improvement in the Middle East and North Africa (MENA) has been slower than in other regions since 2010. Dubai remains the region’s most transparent market, but the most significant progress has been in the Lebanon, where the market is gaining transparency and attracting more institutional players.
By contrast, Egypt is the only market globally to have registered deterioration in transparency over the past two years.
The 2012 Global Real Estate Transparency Index shows that the United States ranks as the world’s most transparent real estate market in 2012, followed closely by the United Kingdom and Australia. Also in the ’Highly Transparent’ category: Netherlands, New Zealand, Canada, France, Finland, Sweden and Switzerland. The Index reaffirms the ascent of the MIST growth markets (Mexico, Indonesia, South Korea and Turkey), which all feature among the leading improvers. Turkey once again leads in transparency improvement.
Environmental sustainability has emerged as an important transparency factor with the United Kingdom, Australia and France the most transparent markets in terms of real estate sustainability. The UK has a long history of building energy efficiency systems and introduced the world’s first Green Building rating system. Australia has been the test bed for new environmental laws, regulations and incentives. Dubai scores less well than other major global cities in respect of the transparency of sustainability related issues.
The 2012 Index highlights continued transparency deficiencies in many African, Middle Eastern and Latin American markets. Nations scoring the lowest on transparency, the so-called opaque markets, include Sudan, Nigeria, Ghana, Iraq, Pakistan and Algeria.
While transparency has improved in 80 percent of the markets across MENA over the past two years, these gains have been relatively modest and real estate markets in MENA remain less transparent than other global regions. Dubai remains the region’s most transparent market but achieves only a middle ranking in global terms (47 of 97 markets covered globally), while Lebanon has shown the greatest improvement over the past 2 years.
Commenting on the findings of the index for the Middle East & North Africa region, Craig Plumb, Head of Research for Jones Lang LaSalle MENA, noted that "more needs to be done to increase the level of transparency of the market both in Dubai and across the broader region, particularly in respect of investment performance indicators and data on market fundamentals. The lack of progress on these areas in recent years has contributed to the low level of investment activity and the oversupply that is currently being experienced in some sectors of the market. We expect to see more improvement in transparency over the next few years as policy makers recognize this will attract greater demand from overseas investors and occupiers familiar with higher levels of transparency and market information. The increased focus on sustainability is also likely to result in higher levels of transparency and disclosure."
The report identifies four main forces that are expected to drive further progress in transparency through the next update in 2014:
• The growing recognition in many emerging economies, such as the Middle East and North Africa, that the current lack of performance indicators and accurate market information is hindering inward investment and hampering the development of competitive domestic real estate sectors.
• The ongoing credit and sovereign wealth crises, particularly in Europe, will motivate regulators, central banks, foreign investors and other real estate professionals towards better transparency, in the process offering more public data on real estate debt and monitoring lenders more closely.
• As recent corruption scandals come to light (often involving the permit process for commercial real estate development), governments will pay closer attention to the circumstances that engender under-the-table payments.
• The role of properties’ sustainability characteristics will play an increasing role in leasing and investment decisions, growing from a marginal criterion to a critical decision-making input. Such concerns will force greater transparency of energy efficiency and Green Building benchmarking. – SG