Archive for the ‘Transparency Research’ Category

Will Indian Real Estate Become More Transparent By 2014?

Tuesday, April 23rd, 2013

Jones Lang LaSalle’s 2012 Global Real Estate Transparency Index (Jones Lang LaSalle’s Global Real Estate Transparency Index is a unique survey that quantifies real estate transparency across 97 markets worldwide. The Index is updated every two years) revealed that there has been some improvement in transparency across the world’s real estate markets. Although India improved its overall transparency rating, its Tier I cities (Delhi NCR, Mumbai and Bangalore) were ranked lower at 48 in 2012 compared to 41 in 2010. Tier II cities (Chennai, Hyderabad, Kolkata and Pune) were stable in 49th place globally, and Tier III cities (Ahmedabad, Coimbatore, Kochi, Bhubaneswar and Visakhapatnam) improved their ranking to 50 in 2012 compared to 55 in 2010. This shows that other countries are moving up the transparency ladder faster than India, with the Tier I and II cities of China and the Philippines moving ahead of India in 2012. Under such circumstances, what is India planning to do to improve its real estate transparency in the coming years?

Real estate transparency is one of the key criteria for investment decisions, which is why India’s government and regulatory authorities are working to improve the investment climate through market transparency, albeit at a slow pace. The relaxation of FDI laws, an improvement in the availability of data and the strengthening of regulations in the real estate sector are a few of their initiatives. The Real Estate Regulation Bill is a key policy that is expected to improve India’s transparency score; it is likely to be tabled in the upcoming winter session of the parliament in 2013. Some more aspects that are expected to make India more transparent by 2014 are noted below:

  • Performance Measurement – The availability of time series data and indices on real estate returns will improve with the increase in the number of listed real estate companies and institutional investors in India.
  • Market Fundamentals – The availability of accurate time series data on market fundamentals (demand, supply and real estate prices) for the office, retail and residential sectors is expected to improve. Data availability on the industrial and hotel sectors is still opaque but is expected to improve marginally over the next few years.
  • Regulatory and Legal – The introduction of the GAAR (General Anti-Avoidance Rule) and the CLR (Computerisation of Land Records), and the further strengthening of real estate regulations is expected to improve transparency in the application of tax and building codes, and the availability of title records.
  • Transaction Process – With the increase in multinational occupiers in India, the clarity of contracts in occupier services is expected to improve further. The presence of international property consultants and their better client services are improving the professional and ethical standards of property agents in India. Therefore, transparency scores in this sub-index are also expected to increase.

    • As both international and national developers in India are penetrating deep into the cities, transparency scores are expected to improve further. By 2014, India’s Tier I cities are likely to be close to transparent (The cities are scored at a scale of 5 where 1.00-2.59 is transparent, 2.60-3.76 is semi-transparent and 3.77-5 is opaque), with the availability of more accurate data on returns and market fundamentals. Tier II and III cities will continue to be lower down the semi-transparent tier, albeit with higher transparency scores.

    About the author
    Trivita Roy is the Senior Manager of Research and Real Estate Intelligence Service, for Jones Lang LaSalle in India, based in Hyderabad.

    Posted in India, Transparency Research | No Comments »

    Hong Kong Property Market To Weather The Latest Round Of Control Measures

    Thursday, February 28th, 2013

    Last Friday, February 23, the Hong Kong government and Hong Kong Monetary Authority announced new control measures for the city’s property markets, including non-residential properties. The most punitive of these new measures was the doubling of stamp duties for properties worth over HKD 2 million, capped at 8.5%, and the requirement to pay stamp duty on sale and purchase agreement rather than upon assignment (execution of the conveyance of sale).

    So what are the likely outcomes of these new control measures?

    If history is anything to go by, we can expect sales volumes to slow and capital values to consolidate over the next few months. Property sectors where we have seen the greatest amount of speculation and where prices have moved too far ahead of underlying fundamentals are likely to face the greatest pressure. Certain parts of the retail property sectors, for example, are likely to enter a window of consolidation. A severe correction in property prices, however, is unlikely given that the underlying drivers of buying demand remain intact; that is, low interest rates, a healthy economy, tight vacancy rates and narrow supply pipelines across the property sectors and a clear lack of investment alternatives. Against this backdrop, we may also see market yields edge up temporarily over the short term.

    Another interesting outcome that is likely to arise is a drop in market transparency. With stamp duty now payable upon the signing of the sale and purchase agreement for non-residential properties, confirmor (sub-sales) are set to become a lot more expensive. Market participants could potentially circumvent the requirement of paying the new stamp duty rate by engaging in equity transfers via the sale of property holding companies, which are subject to a much lower stamp duty rate (HKD 5 + 0.2% of the market value). If this trend does indeed take off, then market transparency, in terms of transactional data, will diminish significantly. Our experience, and previous research, has shown that market transparency is an important factor in the growth of property markets, globally. Hence any deterioration transparency could negatively affect Hong Kong’s standing as an international destination for property investment.

    About the author
    Denis Ma is the Local Director for Jones Lang LaSalle in Greater Pearl River Delta, based in Hong Kong.

    Posted in Hong Kong, Investment Strategies, Transaction Volumes, Transparency Research | Comments Closed

    Transparency

    Wednesday, February 27th, 2013

    Transparency is Corporate Real Estate (CRE) executives’ key issue when expanding into developing and emerging markets, as answers to our Global CRE Survey 2013 (to be published in April 2013) illustrate. Other complications such as lack of suitable real estate offer, high start-up costs or lack of unified real estate standards are deemed less challenging.

    What is the main issue when expanding into developing and emerging markets?

    • 19% real estate market transparency
    • 18% political transparency
    • 17% economic transparency
    • 10% lack of suitable real estate offer
    • 7% start-up costs
    • 7% lack of unified real estate standards

    Source: Global CRE Survey 2013

    A few regional variations are to be noted. While a lack of unified real estate standards is a main concern for 11% of respondents based on the American continent and 9% in APAC, it is largely irrelevant for respondents based in EMEA (2%).

    Among APAC markets, the lack of real estate transparency is a major issue for companies based in India (33%), while the lack of political transparency comes first for those based in Japan (32%) and Australia (17%), and the lack of economic transparency for companies based in China (43%).

    Western multinationals in these countries do not share the same concerns as domestic corporations. In particular, the lack of real estate market transparency is a clear #1 issue for a majority of Indian (56%) and Chinese (50%) domestic companies.

    It is interesting to contrast these findings with the Global Transparency Index, Jones Lang LaSalle’s biennial survey that covers 97 markets worldwide to help identify differences when transacting, owning and operating abroad.

    Real estate transparency levels vary widely across APAC. The region has two of the world’s most transparent markets – Australia and New Zealand – and two other mature economies – Hong Kong and Singapore- rank relatively highly, on a par with most Western European countries. However, its largest investment market, Japan, has low levels of transparency compared with its economic maturity. There is also room for improvement in South Korea, and the region still contains some of the world’s least transparent markets, such as Vietnam and Mongolia.

    Comparing the 2012 index with its previous issues, we see that South East Asia clearly leads improvements in real estate transparency. In China and India, the increasing penetration of national and international occupiers has acted as a catalyst to improving transparency levels beyond Tier 1 cities, boosting the market up from opaque in the 2006 ranking to semi-transparent in 2012.

    A subset of the main index, the Global Transparency Index for Occupiers, attributes more weight to factors that are pivotal to corporate occupiers such as regulation, market fundamentals, occupier services as well as land and property registration. For those of you who would like to play with the index’ 13 factors, a Transparency Tool Kit allows you to create a custom index by entering a weight for each of the transparency building blocks. This is the latest of a suite of tools providing you with insightful knowledge at a click of a button.

    About the author
    Anne Thoraval is Director, Corporate Research for Jones Lang LaSalle in APAC, based in Singapore.

    Posted in Corporate Real Estate, Transparency Research | No Comments »

    Vietnam Real Estate Market Transparency: What’s The Buzz?

    Tuesday, July 10th, 2012

    Vietnam’s real estate market has long been perceived as non-transparent, even by the local people. Recently, the country saw an encouraging improvement in its ranking in the 2012 edition of the Global Real Estate Transparency Index and became the third top improver in the Asia Pacific region, behind Indonesia and the Philippines. While other peers in the region have also made great improvements in their transparency scores, in line with the global trend of being “back on track”, the improvement in Vietnam deserves attention.

    The country is now positioned right next to the “Semi-Transparent” tier. A movement up into the “Semi-Transparent” tier in the next two years, which is likely, given the current pace of market developments, would afford the country the power to rebrand itself for foreign investors. If we see that happening in our next edition in 2014, one may find it noteworthy to see a country transform from “Opaque” to “Semi-Transparent” in less than ten years.

    There are several reasons behind Vietnam’s improvement. First, market fundamentals data has become significantly more available, thanks to greater market penetration by real estate professional services firms. For example, Jones Lang LaSalle researchers constantly work towards increasing the company’s coverage of various real estate sectors by collecting and maintaining market-aggregated data series and databases of individual properties and transactions, which can be used by institutional investors to quantify market opportunities and risks.

    Second, the increased penetration of both foreign investors and multinational corporate occupiers has led to a more competitive real estate marketplace. In particular, this has led to improved bidding and negotiating processes for real estate transactions, greater access to professional property valuation and better professional standards for project and facility management services for corporate occupiers.

    Third, government efforts to improve the corporate governance of listed vehicles have led to moderate improvements in market transparency. A decent number of real estate firms are publicly listed in Vietnam, as is the case in many other markets. Since these firms are widely followed by the investing public, they usually have a major influence on investor confidence in the overall real estate market. Thus, a robust framework of corporate governance provides institutional investors with increased confidence in gaining control over the performance of their investments, either through direct real estate or real estate securities. The findings in the 2012 Index, which noted a moderate improvement in Vietnam’s corporate governance, are relatively in line with the results published previously in the Vietnam Scorecard Project – 2011 Report by the International Finance Corporation – a member of the World Bank Group.

    Still, there is much to be done in Vietnam to improve market transparency, as most improvements witnessed over the last two years have been reactive in nature. Since the country is now on the borderline between “Low Transparency” and “Semi-Transparent”, market developments must be closely watched, and our research team at Jones Lang LaSalle Vietnam is doing exactly that.

    About the author
    Trung Thai is the Manager of Research in Vietnam and is based in Ho Chi Minh City.

    Posted in Investment Research, Transparency Research, Vietnam | No Comments »

    New Zealand Ranks Number 1 In Transaction Process

    Friday, June 29th, 2012

    Investors in New Zealand real estate can rest easy knowing that when they undertake a transaction the process is rated a global best, according to a recent transparency survey by Jones Lang LaSalle.

    Yes, according to the latest Global Real Estate Transparency Index (GRETI) New Zealand ranks 1st for its Transaction Process out of 97 markets worldwide. GRETI is a joint initiative with LaSalle Investment Management. The Index is a unique survey updated every two years and the 2012 edition represents the seventh edition. The Index is widely recognised as the benchmark of real estate transparency.

    So, what are some of the factors that separate New Zealand from the other markets?

    In terms of the actual sales transaction, New Zealand’s quality and availability of pre-sale information, fairness and confidentiality of the bidding process and professional and ethical standards of the property agents are considered second to none.

    These three factors are increasingly important in a world that is coming to grips with the necessity of transparency for all transactions.

    In New Zealand there is a variety of sources to obtain property sales information through government, corporate and private avenues. This is similar to many developed nations. However, one factor that separates New Zealand is the extended time period and robustness of continuous data recorded across most forms of commercial and residential real estate.

    An example of this type of data provision consolidated into one easy format is Jones Lang LaSalle’s Real Estate Intelligence Service (REIS). This comprehensive market research document provides physical and financial metrics over the last two decades.  The access to this type of information in tandem with complementary market research and bespoke consultancy services enables investors to make a well-informed transaction decision.

    As the GRETI identifies, adding to the transparency of the transaction process is the professional and ethical standards of property agents. Their actions, up-skilling and monitoring are continually assessed by the Real Estate Agents Authority (REAA). There are also other official bodies which enable investors to bid for any asset knowing that the process is fair and confidential.

    The global flow of capital is progressively reaching destinations from one side of the world to the other searching for prosperous and transparent markets. We are increasingly seeing global investors investigate and purchase assets in New Zealand. There was approximately NZ$290m transactions in 2010 from foreign investors compared to NZ$550m in 2011. The latest survey findings add support and are a testament to New Zealand’s attractiveness as an investment destination.

    For more information on GRETI the REIS and how Jones Lang LaSalle can assist with your next transaction in New Zealand visit us at www.joneslanglasalle.co.nz.

    About the author
    Chris Dibble is Associate Director of Research and Consulting for Jones Lang LaSalle in New Zealand.

    Posted in New Zealand, Transparency Research | No Comments »