Poland leads the field in improvement in property market transparency

2010-08-06

Recent research by the Global Real Estate Transparency Index (GRETI) reveals that improvement in the transparency of the commercial real estate market has slowed markedly. There is one positive symptom, however: the fact that in spite of the global trend, in some countries the situation is still improving apace. Poland has one of the best rates of improvement in these statistics.

GRETI is a system of research into the transparency of the real property markets in 81 countries. It has been operating since 1999 and is updated every two years. The research is conducted by Jones Lang LaSalle and LaSalle Investment Management, companies active on the real property capex and operating markets. Transparency impacts on the level of investment in real property and the competitive advantage of a given market. Property markets are tested in relation to the following markers: the economic foundations of the market, legal regulations and laws, the transaction process, an effectiveness gauge, and available market instruments.
In spite of the overall improvement in transparency on the property market, over the years 2008-2010 the whole process slowed in relation to the two previous periods (2004-2006 and 2006-2008). The average improvement in real property transparency on the markets covered by the research has declined by a half. This fact has been justified by the deterioration in the situation on the world financial and property markets in recent years, which has done more to increase competition than to encourage work to improve market transparency.
The most transparent market was Australia’s. Next in the ranking were the markets in Canada and Britain. In spite of their leading position, these countries have had to deal with problems of solvency and instability. Two years ago New Zealand and the United States were also among the leading countries. Now these have been joined by European countries, including Sweden, Ireland and France. The next four places are also held by European markets. Moreover, of the 15 markets where improvement has been seen, as many as nine are in Europe. The other six are Asia-Pacific countries. The greatest change for the better has been seen in Turkey, but there has also been progress in China, India, Portugal, Romania, Greece, Germany, Ireland, Denmark, Poland and Hungary. Deterioration or stagnation was found in 27 countries.

Central and Eastern Europe
The European market is not homogeneous. There are differences visible at country level, and hence it is difficult to draw conclusions that would be applicable to regions. Nevertheless, over the past few years there has been a marked improvement in the situation in the countries of Central and Eastern Europe, such as the Czech Republic, Hungary, Poland, Romania and Slovakia, in connection with their accession to the European Union. The demands that the EU makes of new members have forced changes in the real estate sector, as well as in finance and banking. As a result, the legal environment and regulations of European countries have become particular strengths of these markets. Central and Eastern Europe also achieves strong results in terms of numbers of transactions concluded, including an increasing number of foreign transactions. The presence of consultants offering professional international advisory services across the region and good flow of information is also important. Although European countries have to contend with problems connected with tenders, negotiation and property value assessments, they are still attractive investment markets.
According to the authors of the report, the three countries in Central Europe with the highest level of transparency on the commercial real property market – the Czech Republic, Poland and Hungary – demonstrate a level of this indicator that is comparable to or higher than the less transparent markets in Western Europe. This is due partly to the implementation of EU mandatory regulation and partly to the participation of foreign investors in transactions on the real estate market. Jones Lang LaSalle stresses that the historical differences between the CEE countries and Western Europe are becoming less noticeable and are losing their significance to both investors operating on the property markets and commercial tenants. In the study discussed here, Poland came 22nd among the countries identified as transparent. The Czech Republic came 24th, and Hungary 27th. At the same time, Poland took second place behind Turkey in terms of countries where the biggest improvement in transparency was seen.
Not all CEE countries are making the same degree of headway, however. Examples of such markets are Bulgaria, Russia and Ukraine. In Bulgaria legislative changes introduced at the beginning of 2010 were designed to improve transparency by stipulating that all transactions had to be conducted through the banking system, in order to reduce the number of cash transactions. These changes have not to date produced the desired effect, however, because Bulgaria continues to be plagued by corruption. The country’s accession to the EU is an opportunity for improvement, because in the long term further legislative changes will be required to meet EU standards, and these may prove more effective. In the case of Russia and Ukraine the lack of such requirements and the deterioration of the climate on the property market suggest that the situation will worsen. This is surprising because as recently as in 2008 the situation in these countries was gradually improving.
Given the overall picture of the CEE region that emerges from the research, however, Jones Lang LaSalle believes that a lasting process has begun that will improve the attractiveness of these commercial property markets.

Justyna Kukian
PMR Publications

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