Capital allocations to real estate expected to exceed $1t over coming decade…

Recording persistent progress, Dubai has retained its position as the most transparent real estate market in the Middle East and North Africa region, according to JLL and LaSalle Investment Management’s 2016 Global Real Estate Transparency Index (GRETI).

With capital allocations to real estate expected to exceed $1 trillion over the coming decade, Dubai’s enhanced transparency ranking in the index, bodes well for its real estate sector, currently one of the most vibrant markets in the Middle East, property analysts said.

Placed 48th out of 109 markets covered globally, Dubai remained in the ‘Semi-Transparent’ category, improving by 23 points to be among the top 25 global improvers. Abu Dhabi, ranked (59th) globally, while Saudi Arabia (63rd) and Egypt (65th) have nudged into the ‘Semi-Transparent’ group for the first time.

In the region, the strongest advances over the past two years have been achieved in Saudi Arabia Egypt and Pakistan (88th). Two new markets – Iran (77th) and Djibouti (107th) – have been added to the Index for the first time, reflecting increased interest among international investors, developers and occupiers.

The JLL report however notes that Dubai needs to introduce a citywide performance index if it is to improve the property market’s transparency. “Dubai had made improvements through the open data law, which allows more government data to be shared, the added detail to the rental index calculator and through a new system for ranking brokers. But a lack of a real estate performance index remains a major constraint for institutional investors seeking to benchmark the performance of their assets,” the report said.

Dubai has moved closer to the top of the ‘semi-transparent’ category, where it sits on a par with Tier 1 cities in the BRIC (Brazil, Russia, India and China) countries and all four of the fast-growing MIST (Mexico, Indonesia, South Korea and Turkey) economies. According to the biennial Global Real Estate Transparency Index, the UK and Australia rank respectively first and second worldwide in transparency.

“Dubai has made good progress, recording a 10 per cent improvement in its score over the past two years,” said Craig Plumb, head of Research, Mena at JLL.

“It is positioned in a part of the global ranking which contains some of the most dynamic markets in the world, many of which are seeing growing middle classes mobilizing against corrupt practices.”

The 10 countries identified as ‘highly transparent’ by GRETI account for 75 per cent of global investment into commercial real estate, highlighting the extent to which transparency drives real estate investment decisions.

A number of key factors are driving progress and frame the broader issues raised by both high and low transparency. Capital allocations to real estate are growing. JLL forecasts that within the next decade in excess of $1 trillion will be targeting the sector, compared to $700 billion now. This growth means investors are demanding further improvements in real estate transparency, expecting standards in real estate to be on a par with other asset classes.

There is a growing recognition that transparent real estate practices play a significant role in capital formation, municipal finance, and as a foundation to improve the quality of life in many communities. This foundation includes security of property ownership, safe housing and workplaces and the ability to trust agents to act honestly and professionally. Technology is both a driver of the digitisation of all kinds of real estate data and also an enabler in disseminating and analysing this data; improvements in data capture techniques are allowing a more granular and timely assessment of real estate markets.

The Dubai government acknowledges the important role that improving transparency plays in increasing levels of foreign investment in its real estate market. Its new Open Data Law aims to promote the sharing of non-confidential data between government and non-government entities.

Real Estate Regulatory Agency, the regulatory arm of Dubai Land Department, has implemented several new measures to advance the accessibility and quality of real estate data available to potential investors.

“We are pleased that Dubai has recorded an improvement in 15 of the 28 areas covered in JLL’s Global Transparency survey,” said Sultan Buti bin Mejren, director-general of Dubai Land Department (DLD).

“We are particularly proud to see that the greatest advancement has has been made in the area of market data, where the DLD can make the most direct impact on transparency.”

“While we have certainly made good progress over the past two years, we recognise that further initiatives are required if Dubai is to achieve its goal of delivering a more transparent market,” said bin Mejren.

“The most significant of these lie in the area of performance measurement, where the current lack of a real estate performance index is a major constraint for institutional investors seeking to benchmark the performance of their assets. The DLD is actively looking to create such an index (possibly in association with a specialist index provider). We are confident that such an index will be in place by the time of JLL’s 2018 survey, supporting a further improvement in Dubai’s transparency,” he said.

Issac John / Dubai ; Khaleej Times ; 30 June 2016