The 2008 Real Estate Transparency Index: Who’s High, Who’s Low?

A lot of investors find the idea of putting their money in international real estate intimidating because it involves doing business in a different culture, and more times …

A lot of investors find the idea of putting their money in international real estate intimidating because it involves doing business in a different culture, and more times than not, in a different language. In addition, the rules governing real estate markets can be unclear in many countries and can, in a worst case scenario, result in unexpected loss of investment.

Sometimes the plethora of requirements in some markets can make even the most seasoned, adventurous investor run in the opposite direction. Complex and protracted transaction processes generally open the door for corruption. As with a lot of things, accurate and timely information is key when it comes to making a financial investment in a real estate market.

Jones Lang LaSalle, a financial services company focusing on real estate, and LaSalle Investment Management, its global subsidiary, recently came out with the fifth edition of their Real Estate Transparency Index. The report looked at performance measurements, market fundamentals, listed vehicles, legal and regulatory environment and transaction processes in 82 markets around the world. It then categorized countries as having high-transparency, transparent, semi-transparency, low-transparency and opaque real estate markets.

The company hopes the Real Estate Transparency Index, among other things, will tip government officials of low transparency-scoring countries and motivate them to take measures to improve various aspects of their real estate markets.

Venezuela’s real estate market is the only in the study whose opacity increased| alt=|A crowded hill of slums in Venezuela|]“The steady improvement in transparency, particularly over the last four years, is closely linked to the forces of globalization that drive investors to move across borders in search of higher risk-adjusted returns. This movement of both capital and corporations around the world has created an even greater need for information about markets. It has also created an incentive for governments to streamline bureaucratic practices which prevent the free flow of capital into and out of global markets,” said Dr. Lee Elliot, a director of Jones Lang LaSalle’s research team, according to the company’s press release.

Transparency around the world is rising, according to the report. Half of the countries surveyed in 2006 showed improvement. Eight countries moved up into a whole new, better transparency category. At the same time, 18 countries in the lower transparency tier remained at a standstill, showing no or little improvement.

The top improving countries were Dubai, Romania, Ukraine and Russia, while Venezuela is the only country whose transparency score actually went down.

The Americas

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The transparency survey looked at 11 countries in the Americas. Brazil and Panama posted the biggest transparency improvement. Canada and the United States remained the most transparent in the region. Countries falling in the middle, as semi-transparent markets, include Argentina, Brazil, Chile and Mexico. Colombia, Costa Rica, Panama, Peru, Uruguay, Venezuela and the Dominican Republic remain as markets marked by low real estate transparency.

Middle East and North Africa

Rising interest from real estate investors in the Middle East and North Africa (MENA) region has helped put market transparency issues high on government agendas. Overall, however, the MENA region had the lowest average transparency when compared to other surveyed regions.

There is hope that the significant increase in investor interest the region has seen in recent years will drive governments to reform antiquated real estate market practices and put measures in place to eliminate corruption.

Asia Pacific

Markets in Asia Pacific have a wide transparency gap. The region contains high transparency markets such as Australia and New Zealand. However, it also houses Cambodia, which is classified as having an opaque real estate market.

India, China and Vietnam were 2008’s most improved markets in the region. The fact that these countries received a massive amount of investor interest over the past few years is telling. Indonesia, Malaysia and South Korea, however, showed little improvement.


Romania was one the most improved European real estate markets, according to the report Bucharest Romania along the Dambovita River|]Half of the markets that showed improvement since the last time the report was published, in 2006, are in Europe. Romania showed a vast improvement over the past two years while Turkey remained at standstill as a low transparency market. The markets with the highest transparency in the region are the Netherlands and United Kingdom.

While Europe as a region performs well in the Index, there are significant variations between sub-regions within the continent. These differences show up between Western, Central and Eastern European countries, with countries outside of Western Europe performing less well.

The national transparency scores contained in the report are based on main cities in assessed countries. However, the report also notes that, particularly in emerging markets, there can be a noticeable transparency gap between cities. China and Russia have the biggest transparency gaps between tier 1, tier 2 and tier 3 cities, while surprisingly enough, India was found to have the least.

The report concluded that the level of real estate transparency is a crucial consideration in international investments. “Many cross-border investors focus on more mature, open and transparent real estate markets such as the U.K., Canada, Netherlands and Hong Kong,” said Dr. Elliot. However, high level of transparency doesn’t necessarily translate into risk free investment and does not protect investors from market volatility.

Risk taking investors will not be intimidated by semi-transparent markets but they will expect to be rewarded with higher returns. “Only the most opportunistic investors will consider semi-transparent markets found in Eastern Europe, Latin America and Southeast Asia,” said Dr. Elliot.

Opaque markets such as Algeria, Belarus and Cambodia will only see small international investments in their real estate sector, according to Dr. Elliot. “[They] are still very problematic, from the perspective of both investors and corporate occupiers,” he said.

For the full report, see the Jones Lang Lasalle website.


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