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Emerging markets become more ‘transparent’

Canada has the most transparent commercial real estate market in the world but Dubai, Romania, Ukraine and Russia show the biggest improvement in transparency levels over the past two years, according to a report from Jones Lang LaSalle.

Emerging markets in Eastern Europe, Latin America and Asia are becoming increasingly transparent as governments streamline real estate regulations to boost cross-border capital flows, a report by property services firm Jones Lang LaSalle and its investment management arm, LaSalle Investment Management, has found.

Surveying 82 countries, the firm said just one country – Venezuela – failed to improve on its transparency score in this year’s Global Real Estate Transparency Index, compared with the last report in 2006. The country had, the report said, changed regulations and taxation policies targeting foreign investors.

Almost half of the countries surveyed this year saw significant improvement in their transparency scores compared with two years earlier, while eight countries moved up a “tier” of transparency over the same period. Dubai, Romania, Ukraine and Russia showed the biggest improvements in transparency since 2006, followed by Egypt and Saudi Arabia.

The index ranks a country according to performance, market fundamentals, listed vehicles, legal and regulatory environment and the transaction process. The scores range between one and five with one being the highest level of transparency and five being opaque. 

The top ten most transparent countries, the report said, were Canada, Australia, the US, New Zealand, the UK, the Netherlands, France, Sweden, Belgium and Ireland. Canada was rated at 1.17, while the least transparent country, Syria, was rated at 4.76.

The bottom five countries also included Algeria, Cambodia, Sudan and Belarus, which were all classed as having “opaque” transparency.

The LaSalle report said low transparency did not just mean “corruption … the presence or absence of corruption is only one component of real estate transparency.” Others included consistently applied and interpreted laws and regulations, the respect of private property rights, the access to and time series of investment performance indices and market fundamentals data, and ethical standards of professionals in the commercial real estate market.

Jacques Gordon, global strategist at LaSalle Investment Management, said the growth of cross-border opportunistic investments was directly impacting on transparency levels, saying, in many cases, it had created an incentive for governments to streamline “bureaucratic” practices. “[The] movement of both capital and corporations around the world has created an even greater need for information about markets.”

However not all governments had “embraced the necessary changes,” he added, saying opaque markets such as Algeria, Belarus and Cambodia were still “very problematic” for investors.

The 2008 index surveyed an additional 26 countries compared with the 2006 report, including many in the Middle East, Asia and Eastern Europe. New measurement criteria were also included to cover debt financing, occupier service charges, and facilities and project management services and fees.