Property advisor firm JLL has issued a report stating 75% of international real estate investments are made in transparent marketplaces. It took me a re-read of the headline to realize that they were not saying that 75% of real estate markets are transparent, but rather that 75% of real estate investment was in those markets.
On it’s face, it’s not much to report — of course investors prefer markets in which the fundamentals are clear, rather than risking funds in obfuscating markets that feel like the 3-card monte table on the corner of 39th and Eighth. [And why is it that I can never find the queen “and take home the green?” Does anyone actually win at that game?]
As I thought about it a bit more, I realized 1) that the majority of real estate investment is in North America and Western Europe, and 2) markets looking for foreign investment would be well served to start investing in technology to create a transparent investment environment (and spend less time and money bring FIFA officials to hopefully host a World Cup).
Now, I’ve watched enough “Twilight Zone” episodes to know that technology is not the answer in itself, but if you think about the real estate markets that are safest in which to invest (US, Canada, UK, Australia) they are markets with the most transparency — and also those with the most accessible data (such as Multiple Listing Services, public records, and data aggregating services). Additionally, the countries that have shown the largest leaps in transparency (mainly in Eastern Europe) have increased their technology footprint as it relates to the above.
Trade pacts and outsourcing production can certainly benefit emerging markets, but those are generally bandaids aimed at specific industries and immediate needs. For true economic growth possibilities, government policy must allow for either state or private development of information infrastructure (meaning an exchange for clearing data, which may or may not be dependent on building a technology infrastructure). Once information exchanges can be established with reliable independent data, a market is one step closer to transparency.
There are a lot of steps that need to be taken to create an “investable” transparent market, another being high ethical standards. As with stocks, bonds and banking, the idea of the “level playing field” is key to investor confidence. Countries in which governments and/or regulatory agencies perform in extremely predictable ways and follow set regulations are more inviting than those with a nationalizing junta lurking around the corner. With stability comes the ability to develop a higher standard for business ethics, which can make a translucent market turn transparent. Additionally, as regulatory agencies are given independence (and a good set of teeth with which to enforce their regulations) the markets will be more able to keep the bad apples on the sidelines.
I find much of this exciting as more transparent markets allows for investors to spread portfolio risk across more countries, much the way stock investors do so in foreign markets as a hedge against shocks to the Dow Jones and FTSE averages. International real estate investors would be well served to keep an eye open for real estate start-ups and tech platforms in emerging markets as an indicator of where property dollars may be going next.
To read the original article on Property Wire go to http://goo.gl/9zCc0M