See through the spin

Where there is transparency in dealings, there is a healthy property sector. Even the world's newest markets understand this is the key to strong offshore investment. Rachel Macdonald looks at how Dubai fairs in the global transaction ratings.

Few weeks ago, international real estate advisory firm Jones Lang LaSalle released its latest Global Real Estate Transparency Index. This body of research is considered a key indicator of current and future property investment potential across the 82 countries surveyed.
Of those markets, 26 appeared in the Index for the first time in 2008, and eight were shown to have moved up a full transparency layer since the last survey in 2006. Overall, Dubai, Romania, Ukraine and Russia showed the biggest improvements in transparency over the last two years.

The index assesses five attributes of real estate transparency shown to be pivotal to the decision-making of international investors choosing where to place their money.

Firstly, it considers the market mechanisms available to global investors by which to measure asset performance - whether data concerning vacancy, and market transactions, for example, are accurate and made available.

It also examines market fundamentals such as supply and demand, and the economic environment; and the presence or otherwise in the market of listed investment vehicles, which provide a greater level of security for the investor.

Finally, of considerable significance to foreign investors are the rigour and integrity of the legal structures surrounding property purchase and disposal; and whether the local regulatory systems regarding real estate are too lax, suitably effective, or overly restrictive.

According to the results of the research, countries achieve an index score of between one and five, with one being the highest level of transparency and five being considered opaque.

They are grouped into the following broad bands: Highly Transparent (Tier 1), Transparent (Tier 2), Semi-Transparent (Tier 3), Low Transparency (Tier 4), and Opaque (Tier 5).

Interestingly, the presence or absence of corruption and unethical dealing in the countries studied doesn't automatically equate to a low index score. It is only one component of transparency, although it does - in itself - tend to prompt money-wise investors to stay away in favour of more predictable propositions.

More important is evidence of consistently applied and interpreted laws and regulations, a respect of private property rights, access to regular investment performance indices and market fundamentals data, and ethical standards of professionalism in the commercial real estate market.

This year's index also added several new dimensions to the survey. They are a reflection of the increasing numbers of cross-border transactions resulting from widening globalisation and the ever-increasing need for institutional investors to increase their portfolios of high-quality assets.

New transaction process measurements were included for debt financing commitment terms and fees, occupier service charges, and facilities and project management services and fees.

Such data are all helpful for corporations needing to understand total occupancy and transactions costs, and institutional investors seeking to analyse broad market statistics and historical performance benchmarks.

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