The real estate sector is not only one of the world’s most valuable asset classes but also significantly impacts the overall economy, according to new research from Western Sydney University (WSU).
Given that it is crucial for attracting new investments and boosting business activity, transparency in the real estate industry is more than just a best practice—it’s essential.
As well as cultivating an environment of trust and integrity, transparency also enables sound, long-term governmental planning and supports fair taxation systems.
It also enhances community well-being by reducing land disputes, safeguards the overall business environment, stabilises social and environmental conditions and streamlines building processes.
Factors driving transparency
To shed light on why countries like Australia demonstrate high levels of transparency while others lag behind, researchers analysed data from 96 countries spanning from 2004 to 2018.
They also employed the Global Real Estate Transparency Index provided by Jones Lang LaSalle (JLL) as a benchmark.
According to JLL, the criteria defining a market as being transparent include access to high-calibre fundamental market data, time-series data on property rents across sectors and vital performance indicators like the presence of a direct property index.
Other criteria from JLL included:
- Detailed governance data for listed entities, ensuring information such as the free float share of the public real estate market is available.
- Comprehensive insights into the transaction process, emphasising fair bidding processes understood by all parties.
- A well-defined regulatory and legal framework, encompassing mandates like the necessity for lenders to perform exhaustive real estate evaluations.
- Alignment with sustainability objectives, highlighted by elements like the presence of a green building financial performance index.
Key study findings
The WSU study identified key critical transparency drivers.
Firstly, increased real estate transparency is directly related to capital investment in the ICT sector, as well as ICT exports and imports. This is especially true in emerging economies, where capital investment in ICT is more closely linked to transparency than trade.
Rapid information dissemination and the reduction of unreliable information are both, the WSU study concludes, critical by-products of technological advancement.
Here’s what else the WSU study discovered:
- There’s a clear link between real estate market transparency and countries promoting investment freedom and allowing for fewer restraints on foreign real estate ventures.
- Globalisation increases competition between countries, which encourages them to refine legal structures, hence resulting in increased transparency.
- Financial liberalisation may also deliver greater transparency and accountability.
- Countries with strong democratic values, press freedom, association freedom, and effective corruption control measures have higher levels of transparency.
- Countries with a common law system have significantly higher transparency than other legal origin groups, including French, German, Scandinavian, and Socialist.
Insights for policymakers
The UWS study encourages policymakers to increase capital investment in the ICT sector and expand ICT product and service trade with other countries.
Secondly, if policymakers want to improve market transparency, they should, the study suggests, expand internationalisation of real estate markets, control corruption, and protect press and association freedom.
This study has been conducted by Associate Professor Hassan Gholipour Fereidouni (Western Sydney University), Associate Professor Amir Arjomandi (University of Wollongong), Dr. Amirhossein Eslami Andargoli (Swinburne University of Technology) and Associate Professor Rohan Bennett (Swinburne University of Technology).
Image: Associate Professor Hassan Gholipour Fereidouni
