Jones Lang Lasalle issues the Real Estate Transparency Index 2010

Jones Lang LaSalle’s Global Real Estate Transparency Index quantifies real estate market transparency across 81 markets worldwide. The Index aims to help real estate investors, corporate occupiers and retailers understand important differences when transacting, owning and operating in foreign markets. The Index is also a helpful gauge for governments and industry organisations who are interested in improving transparency in their home markets. Rising levels of transparency are associated with rising levels of foreign direct investment – a powerful incentive for encouraging the free flow of information and the fair and consistent application of local property laws.

(Key findings from the 2010 Index: extracts)

The 2010 Global Real Estate Transparency Index (GRETI) reveals a notable slowdown in the progress of real estate transparency over the past two years. It suggests that the recent turmoil in global financial, economic and real estate markets has impacted on market behaviour, with real estate players focusing on survival rather than market advancement. Over the past two years, the average improvement in real estate transparency across the 81 markets covered by GRETI has halved, when compared to both the 2006–2008 and 2004–2006 periods.

Of the top 15 improvers, nine are in Europe and six are in Asia Pacific. Turkey tops the league table of transparency improvers, and progress has been made in China, India, Poland, Portugal, Romania, Greece and Hungary. A number of more advanced markets, such as Germany, Ireland and Denmark, have also moved up the transparency league. The traditional leading pack – Australia, New Zealand, the United Kingdom, the United States and Canada – have now been caught up by a number of European markets. Sweden, Ireland and France now sit among the world’s most transparent markets. The more advanced EU countries (i.e. Poland, the Czech Republic and Hungary) have now caught up with the laggards in Western Europe, such as Italy, who have struggled to improve real estate transparency. However in Russia and the Ukraine, transparency improvements have stalled in 2010, a reflection of the severity of the real estate downturn in both markets and a sharp contrast to the strong improvements registered in 2008.

In light of the financial crisis that has swept the world over the last two years, the 2010 Index has specifically assessed the transparency of real estate debt markets, in terms of the breadth and depth of data available on commercial real estate (CRE) debt (originations, outstanding balances, maturities, and defaults) as well as how thoroughly real estate debt is monitored on banks’ balance sheets. Levels of debt transparency vary greatly between regions, and between developed and developing countries. In many developed countries, the regulatory oversight process is relatively well developed, but the availability of information on CRE debt markets is not. The countries with the highest scores for consistent and thorough CRE debt regulation are Australia, Ireland and Canada.

As the world stock markets illustrate, growing access to data does not eliminate volatility or prevent investors from making errors of judgement. 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.

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