JLL Global Real Estate Transparency Index reports progress driven by increased regulations and new technology
OREANDA-NEWS. June 28, 2018. Governments worldwide have been gradually forging greater transparency in real estate markets, addressing growing demands from investors and the public to deliver significant change.
Over the 20 years that JLL has been publishing its biennial proprietary Global Real Estate Transparency Index, increased regulatory requirements and greater data availability have driven incremental improvements. Since 2016, 85 of the 100 countries surveyed recorded an improvement, and the growing impact of technology may propel this positive trend in the future.
"Transparency is increasingly important for commercial real estate, where investors are allocating ever more capital," said Jeremy Kelly, Director, Global Research, JLL. "The availability and quality of information – from prices to ownership – is crucial when trying to make investment decisions, especially in new markets."
Government measures are aimed at improving their competitive position as both real estate investors and companies looking to lease space increasingly demand standardized data.
Transparency in real estate "increases accountability and quality of governance, and improving it is an important step for countries and cities that want to cultivate a productive business environment," says Fernando Ferreira, Associate Professor of Real Estate and Business Economics & Public Policy, Wharton School, University of Pennsylvania.
There have been noteworthy regulatory improvements, such as the UK's proposed beneficial ownership register and the European Union's Fifth Anti-Money Laundering Directive. India's government has introduced a raft of initiatives aimed at reducing corruption. The U.S., one of the most transparent property markets globally, has adopted proptech faster than anywhere else.
Real estate transparency is slowly moving in the right direction around the world and many countries – including India, China and Turkey – are on the cusp of transparency.
India has introduced wide-reaching regulations in the last two years, ranging from rules that require brokers to be registered, to mechanisms to resolve disputes with developers.
Foreign investment into India's real estate sector has risen in parallel with these changes, to US$6.3 billion in 2017 from US$2.2 billion in 2014, according to JLL data. The anticipated growth in the REIT industry bodes well for further gains.
Dubai has also passed positive regulation. Its government initiatives include a building classification project, improved regulatory procedures, new and enhanced online apps for managing contracts and broker information, and unified lease forms.
Such measures are designed to attract higher levels of foreign investment, "one of the key objectives of the Dubai Land Department," says H.E. Sultan Butti bin Mejren, Director General at the Dubai Land Department.
"While significant progress has been made in recent years, we recognize that further initiatives are required to enhance the level of market transparency," he says.
Technology is poised to provide the next big leap in transparency.
Proptech tools that transcend national borders such as blockchain, brokerage apps and open data could help semi-transparent markets leapfrog the normal process of transparency.
Benefits are not a given. For instance, take data security. "As building sensors start to accumulate massive amounts of data, how do we make sure its use is transparent?" says Kelly.
So far proptech has proved broadly helpful. The Netherlands, for instance, has greatly improved its real estate transparency in recent years in large part due to proptech. The European country already had a transparent real estate market, but innovation around blockchain and open data initiatives have contributed to its improved position in JLL's index.
Whatever changes are on the horizon, investors and the public will continue to scrutinize every move.
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