More transparent real estate market
Based on a report by Jones Lang LaSalle, a professional services firm specializing in real estate, the transparency of real estate has improved in many emerging markets during the past two years, with China achieving the greatest improvement in the Asia-Pacific region.
According to the latest China edition of the Global Real Estate Transparency Index from Jones Lang LaSalle and LaSalle Investment, its global real estate investment management subsidiary, China is currently valued as a semi-transparent market, moving up one full level from low transparency.
“The successful staging of the 2008 Olympic Games has shifted the focus of investors form around the world not only onto Beijing but indeed China as a whole,” said Denis Ma, head of the research department of Jones Lang LaSalle Beijing, adding that the index works as an excellent tool for interested first-time investors in China’s real estate market.
Besides the difference between the three city tiers on the mainland, Hong Kong is one of the world’s most transparent real estate markets, Taiwan is slightly better than semi-transparency and Macao has low transparency below the first city tier on the mainland but slightly higher than second and third-tier cities.
“China’s property markets are as diverse as the country itself. The inclusion of China’s second and third-tier cities in this year’s survey helps users of the index better understand their different challenges,” Ma added.
This is the first China edition of the index and it emphasizes the key findings of the 2008 transparency survey related to China’s different tiers of cities. Previous China ratings reflected only first-tier cities (constant since 1999), so the significant improvement is crucial for China, which has exceeded India for the first time.
According to the findings, the report revealed four major reasons for China’s improvement:
- Globalization, a major push behind real estate transparency, with increasing capital and companies in China stimulating the requirement for accurate market information and introduction of global practices;
- Openness of real estate’s direct relation with the growing volume of investments.
- More public listings by property developers and more market information through annual reports; and
- Central government policies and more available public information through the China Real Estate Intelligence Services (CREIS).
“The steady improvements in China’s transparency level reflect not only the emerging maturity of the country’s real estate markets but also the government’s commitment to opening up the markets to overseas investors,” said Julien Zhang, deputy managing director of Jones LaSalle Beijing.
Among the six areas used to determine market transparency, China has made most improvements on the regulatory and legal field and made the lowest score in market fundamentals. These two areas demonstrated the greatest variance between the different tiers of cities.
“We are confident about China and anticipation further transparency improvements in its real estate market over the coming years, primarily in terms of market fundamentals, regulations and legal issues. By 2010, we project the transparency score will move from 3.3 to 3.1 or 2.7, putting China at the upper end of the semi-transparent category and on a par with current transparency levels in Russia and Brazil,” said Ma.
China’s improved transparency, together with the continuing market modification, seems to enhance the country’s property sector’s attraction for investors.
Contracted investment in the real estate in Shanghai accounted for 27 percent of all foreign direct investment in the first half, twice as much as that in the same period last year, according to the latest report from the city’s statistics bureau report.
“In fact, the number of investors hasn’t changed much. The higher transaction volume is mainly due to more attractive prices in this fluctuating market,” said Eric Chan, deputy managing director of the Beijing branch of Savills, a UK real estate service provider.
The growing property price in China’s 70 major cities has dropped for six consecutive months, with declining transactions and tightening monetary policy loading pressure on property developers’ cash flow.
Industry experts said Morgan Stanley is collecting $10 billion for a global property fund and plans to put $1.5 or more of that into China, despite the fear that the nation’s property market will continue to slide.
Other foreign funds, such as Carlyle, are also looking forward to make new investment in high-end residential and high-end commercial properties in China.
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