June 29, 2016 | 13:00 | Dubai
JLL and LaSalle Investment Management’s 2016 Global Real Estate Transparency Index (GRETI) sees Dubai (48th) retain its position as the most transparent real estate market in the Middle East and North Africa (MENA) region, with Abu Dhabi (59th) following closely behind.
The Kingdom of Saudi Arabia (KSA) has moved up the rankings to finish in the ‘Semi-Transparent’ category. Strong advances over the past two years have seen Saudi Arabia (63rd) and Egypt (65th) move into the dynamic ‘Semi-Transparent’ group, which is largely dominated by large emerging markets, including the BRIC countries (Brazil, Russia, India and China) and all four of the fast-growing MIST economies (Mexico, Indonesia, South Korea and Turkey).
The 10 countries identified as ‘Highly Transparent’ by GRETI account for 75 percent of global investment into commercial real estate, highlighting the extent to which transparency drives real estate investment decisions.
A number of key factors are driving progress and frame the broader issues raised by both high and low transparency:
- 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, 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 on a par with other asset classes.
- There is a growing recognition that transparent real estate practices play a significant role in capital formation, municipal finance, and as a foundation to improve the quality of life in many communities. This foundation includes security of property ownership, safe housing and workplaces and the ability to trust agents to act honestly and professionally.
- Technology is both a driver of the digitisation of all kinds of real estate data and also an enabler in disseminating and analysing this data; improvements in data capture techniques are allowing a more granular and timely assessment of real estate markets.
The JLL report highlights a number of factors which will influence real estate transparency in the next several years:
- Revelations of the Panama Papers in early 2016 have led to mounting pressures for greater real estate transparency and put the fight against corruption decisively on the international political agenda.
- As new data capture techniques get adopted, the pressure mounts for real estate to raise the bar and achieve even higher levels of transparency.
- The mounting intolerance of corruption within the world’s growing middle classes will force the pace of change, especially amongst the Semi-Transparent countries, and social media will help people mobilise around this issue.
- Technology will continue to advance and will allow some countries to leapfrog the traditional route to transparency; we are already seeing this happen in places like Kenya, Ghana and Ecuador.
- There will be greater emphasis on regulatory reform, but also on enforcement, particularly in semi-transparent markets where the greatest disconnect currently exists.