Asia Pacific made the greatest progress globally in terms of real estate transparency over the past two years, according to JLL’s Global Real Estate Transparency Index (GRETI) 2016. The index measures transparency by looking at factors including data availability, governance, transaction processes, and the regulatory and legal environment.
Asia Pacific is a diverse region in terms of real estate transparency. Australia continues to hold the top spot as the region’s most transparent real estate market, and together with New Zealand, is classified as ‘Highly Transparent’.
Overall, improvements in most countries across the region have been small. The biggest improver in the latest survey is Taiwan, which has moved into the ‘Transparent’ category for the first time. More moderate improvements were achieved by Japan, South Korea, India and China, with China’s Alpha cities now on the cusp of the ‘Transparent’ category. At the other end of the spectrum, Myanmar retains the title as the least transparent market in Asia Pacific, although it was amongst the ten biggest improvers globally.
“India has made improvements in overall transparency scores across all markets, and has achieved higher ranks for tier-I, II markets. Improved market fundamentals, policy reforms, and liberalisation of FDI into realty sector and strengthening of information in public domain were main influencers, along with digitization of land records and opening up of REITs,” says Anuj Puri, Chairman & Country Head, JLL India.
India’s low score in transaction process (e.g. high costs of investment transactions, and weak professional standards for local agents) will improve during the 2016-18 assessment period of JLL’s next Transparency Index, on account of enactment of the Real Estate (Regulation and Development) Act and establishing of the real estate regulator.
The major factor driving improvements in Asia Pacific has been the increased availability and quality of market data. For example, Sri Lanka makes a debut in the rankings for the first time and is on the cusp of entering the 3rd tier of markets from its current 4th tier. In some countries improvements have also been seen in regard to performance benchmarking, the enactment of new legislation, the introduction of higher ethical standards, and the wider adoption of ‘green building’ regulations and tools.
“These results are encouraging as they highlight the steady advance of the region’s real estate industry,” says Jeremy Kelly, director, Global Research Programmes at JLL and main author of the report “Taking Real Estate Transparency to the Next Level”.
The launch of GRETI 2016 comes at a time when international institutions, national governments and businesses are demanding greater integrity and clarity in investments and transactions. It reflects a growing recognition of the crucial role that a transparent real estate sector plays, not only as a facilitator of new investment and business activity but also, significantly, in community well-being and inclusiveness, according to the report.
Additionally, capital allocations to real estate are growing. JLL forecasts that within the next decade in excess of US$1 trillion will be targeting the sector globally, compared to US$700 billion now. This growth means investors are demanding further improvements in real estate transparency, expecting standards in real estate to be at least on a par with other asset classes.
“While the region as a whole has shown improvement, most countries in Asia Pacific are still not transparent. There are ongoing examples of poor corporate governance, opaque and corrupt practices and failures in regulatory enforcement that are resulting in serious consequences for society, for business activity and for investment,” says Dr Jane Murray, Head of Research, Asia Pacific.
“Looking ahead, the continued development of the region’s economies and real estate industry will fuel the need for future enhancements in transparency as investor interest rises and the demand for quality buildings and management grows. Regulatory reforms will be essential for further progress in transparency and although public sector initiatives are essential, private sector involvement will also be crucial.”
JLL’s Transparency Index is updated biennially and has been charting the evolution of real estate transparency across the globe for 17 years. The latest survey covers 109 markets worldwide.
Australia and New Zealand
Australia ranked second globally behind the United Kingdom in the ‘Highly Transparent’ group of countries. The group consists of 10 countries, including Canada, United States and France, and accounts for 75 percent of global real estate investment. New Zealand takes the sixth spot.
Singapore and Hong Kong
Singapore (11th) and Hong Kong (15th) are in a near tie for top spot in Asia in the ‘Transparent’ group, although they have not shown any significant improvement and once again have fallen just short of the ‘Highly Transparent’ category. Alignment of shareholders’ interests of listed vehicles in Hong Kong still requires improvement, while the depth of real estate data in Singapore trails many major global markets.
Progress in China has been steady, with greatest advances being in Tier 1 Alpha cities (33rd). Shanghai, which is on the cusp of moving into the ‘Transparent’ category, is a city that is fast-tracking to maturity and witnessing a structural uplift in real estate investment, development and corporate activity. It has seen a threefold increase in real estate investment since 2010.
India’s key cities (36th) are benefiting from proactive measures to increase transparency in the real estate sector. Land records have started to be digitised and made available via an online database, while the Land Acquisition, Rehabilitation and Resettlement Act (passed in 2014) has simplified procedures for acquiring land and determining fair compensation for sellers.
The Indian Parliament has passed the Real Estate (Regulation and Development) Act, 2016, which will help India move up further in the GRETI 2018 rankings as real estate regulators would be fully functional in all states by then.
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