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Auckland

Asia Pacific shows fastest progress in real estate transparency

New Zealand ranks 7th on the JLL Global Real Estate Transparency Index for 2018


 

 

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JLL’s Global Real Estate Transparency Index (GRETI) for 2018 has revealed that the global real estate market is gradually becoming more transparent, with 85 per cent of countries surveyed showing an improvement since 2016. 

New Zealand ranked an impressive 7th on the index in the ‘Highly Transparent’ category, alongside the likes of the Netherlands, Canada, France, USA, Australia and the UK. 

Real estate transparency assists investors and corporate occupiers in making informed real estate decisions and aids local government and public bodies in essential planning for communities. 

JLL Managing Director, Todd Lauchlan says, “New Zealand, although ranking extremely well on the Transparency Index, could make headway in the area of sustainability. Our ranking is 19th at present, our lowest ranking section measured in the GRETI. The reason is sustainable practices here are voluntary, in contrast to countries such as France and Australia where they have been more aggressive with sustainability being driven through legislation. The legislative framework has helped them achieve the top ratings of one and two respectively. If New Zealand was to head down this track we would certainly see an increase in our ranking and of course drive a stronger sustainability agenda and save money in the process.”

Why does real estate transparency matter?
“Highly transparent property markets achieve greater transaction volumes,” explains Lauchlan. 
“Offshore investors account for a large number of New Zealand’s commercial property sales with one of the key drivers being that our commercial property market is transparent and easy to navigate.

“Along with increased investment, a transparent market will also experience improved employee wellbeing and business efficiencies. New Zealand has a lot of advantages in terms of transaction costs with no capital gains tax or stamp duty that makes the net returns to the investor higher compared to comparable markets like Australia.” 

Key factors improving transparency
“New Zealand is making good headway in terms of transparency because we are open to some of the key factors that influence it. We have systems in place for anti-money laundering, we embrace change in terms of sustainable practices, we are also starting to explore the benefits of proptech, which is the utilisation of technology as a solution to challenges in the real estate sector, and we represent a great test market for new sectors to open up. All these factors help drive real estate transparency and although we aren’t at the top of the game in all these areas, we are certainly on our way, something recognised by the volume of offshore investors seeking New Zealand commercial property assets,” says Lauchlan.

One of the biggest threats to transparency is the rapid rise of flexible space. Although this is a positive move for New Zealand’s office market, it can lead to what has been dubbed as ‘hidden vacancy’, which means that vacancy, demand and tenant mix along with rental rates can go largely unreported.

“Some of the world’s largest office markets can have unreported vacancy in flexible space that could effectively add 70-90 basis points to vacancy rates. In Auckland, flexible space is a growing at a rapid pace. Although this may influence how our biggest city is seen on the transparency scale, flexible space is one of the key drivers for small to medium sized businesses seeking space in central city areas. It also can assist new sectors in entering the market, so has the potential to help grow our transparency in other areas,” says Lauchlan.

Biggest improvements in Asia Pacific 

“Asia Pacific as a whole has made the strongest transparency improvements since 2016 compared to the other four regions covered by the study,” says Dr Megan Walters, Head of Research, Asia Pacific at JLL. “This is supported by developments in Myanmar, Macau, Thailand, India and South Korea.” 

Myanmar has registered the most significant improvement globally, moving up 15 places to join the ‘Low Transparency’ group. According to the report, the country continues to open up its economy as increasing investor demand translates into greater market intelligence. 

For the first time, South Korea has nudged into the ‘Transparent’ tier, with heightened investor activity pushing improvements in data coverage and a new carbon emissions trading scheme. 

Dr Walters adds: “It’s also worth noting that India’s reform-driven government has made significant progress in its agenda to improve transparency and reduce corruption. The Real Estate Regulatory Act, which was passed in 2016 and implemented in 2017, is a regional highlight. The country joins China, Indonesia and Thailand at the top end of the ‘Semi-Transparent’ tier.” 

“Looking to Southeast Asia, Thailand and Vietnam are both moving towards the cusp of the next tier of transparency. Thailand’s improvement is underpinned by greater regulatory enforcement, the planned introduction of a new property tax system and steps to digitise its land registry. Macau has also advanced with a focus on anti-money laundering, resulting in increased monitoring by financial regulators,” says Dr Walters. 

Improvements in transparency in some Asian countries have been accompanied by record breaking commercial real estate investment volumes. In 2017, real estate transactions in the Asia Pacific region reached a record US$149 billion. 


About JLL’s Global Real Estate Transparency Index 

This 10th edition of the Global Real Estate Transparency Index (GRETI) contains the most comprehensive country comparisons of data availability, governance, transaction processes, property rights and the regulatory/legal environment around the world. 

The Index is updated every two years and has been charting the evolution of real estate transparency across the globe for 20 years. The 2018 Index covers 100 countries and 158 city markets, and the number of individual factors covered has increased by 36% to 186 factors. 


For a copy of the report: click here.