Australia’s property market is the most transparent with investors given comprehensive and regular access to data regarding rents, prices and valuations, the new Jones Lang LaSalle 2010 Global Transparency Index reveals.
The report also suggests those markets recording better transparency rates will record greater growth and recovery than closed-off markets.
The survey also reveals a number of markets, including the Middle East and North Africa, have recorded declines in transparency rates due to ramifications from the global financial crisis.
The survey measures a country’s transparency based on five criteria: performance measurement, market fundamentals, listed vehicles, regulatory and legal issues and transaction processes.
Respondents were asked to rank Australia’s transparency for each category on a numerical ranking of between one and five. The majority found Australian property investors had more access to fundamental market information, including prices and sales figures, than any other nation.
The Asia-Pacific region also scored higher than most others, while Australia scored an index of one for performance measurement, market fundamentals and listed vehicles, with an overall composite index rate of 1.22. It lost out to Denmark for regulatory and legal issues, scoring 10th, and came in 8th for transaction process data transparency.
Canada came in second, followed by Britain, New Zealand, Sweden and the United States. A number of European nations have made it into the top 10 including France, Ireland and the Netherlands.
Other key findings in the report are that nine of the top 15 fastest improvers are in Europe, while six are in the Asia-Pacific region, while Turkey has recorded the best improvement rate.
However, more importantly, one third of the countries included on the index either stayed at the same rate, or recorded a decline.
Jones Lang LaSelle Australia head of research David Rees says the index demonstrates how the property market is changing.
“You have to take this survey in context. For a long time, the real estate market was regarded as a different kind of asset class, and it was much more of an impenetrable asset. There was no information, compared to something like the sharemarket.”
“Additionally, it was very difficult to get information on rents, leases, and this was one of the inhibiting factors for investors in real estate.”
Rees says that over the past two decades, there has been quite a bit push to resolve these problems and as a result, more investors have entered the market and Australia’s transparency rate has grown.
“When the survey started in 1999, Australia was ranked number one and had actually gone down. But given what we’ve been through over the past two years, there has been a lot more information regarding the market and that has helped things.”
The report itself notes that “the last two years demonstrate how high levels of transparency certainly do not eliminate risks for investors or occupiers”.
“However, the real value of transparency should become evident when comparing how quickly markets are able to open up again after a financial crisis.”
It also notes that markets with high, or rising, levels of transparency are moving through restructuring processes faster than those with declining rates.
“In the future, regulators will rightfully emphasise the importance of greater disclosure in order to gauge the credit-worthiness of commercial real estate and to evaluate the sector’s ability to carry debt.”
“As these steps are put in place, we expect the transparency of real estate debt, and hence all real estate capital markets, to rise.”
The report notes that deterioration has been recorded in several eastern European and Middle-Eastern nations, including Pakistan and Dubai, while Venezuela, Kuwait and Bahrain have also recorded declines.
Rees says that although investors were happy to move into these markets over the past decade, transparency is more important now and these markets could experience some struggles in recovery.
“These investors were quite happy to invest in these risky markets, but now I think there’s a lot more caution. Getting a score index is quite a lot more important than a couple of years ago, and the risk of going into these markets is greater.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
