Transparency in the real estate industry in Latin America is not improving with even countries like Brazil and Mexico which attract a lot of interest from overseas buyers scoring low in a global index.
The situation barely improved between 2008 and 2010 although Brazil and Mexico are showing some signs of progress, according to the Global Real Estate Transparency Index 2010 from international consultants Jones Lang LaSalle.
Less improvement has been registered in the region than in either Europe or Asia Pacific with every country remaining within its 2008 transparency tier. The Dominican Republic has the lowest transparency score in the region and is ranked 77th out of 81 markets globally.
Not a single country falls within the Transparent (Tier 2) level. Chile ranks 34th globally and falls within the Semi-Transparent (Tier 3) level along with Brazil, Mexico, Argentina and Costa Rica, according to the index.
Panama, Uruguay, Colombia, Peru, Venezuela and the Dominican Republic are in Tier 4 – Low-Transparency. Venezuela registered the greatest decline in transparency since 2008 as regulatory and legal changes, including weakened enforceability of contracts, affected its overall transparency profile.
The report indicates that the background for improvement exists in terms of regulatory and legal categories but many countries are let down by the transaction process.
Many countries in the region still lack widely available property market and investment performance data and this is a major factor that is holding back transparency in the industry.
The report says that data collection is generally of a lower priority as building strong legal and property rights is seen as a higher priority. But positive developments over the last two years, such as the introduction of real estate security indices in Brazil and the development of a new investment vehicle in Mexico, suggest Latin American scores in performance measurement will improve in time.
These new indices and securities are absolutely necessary in the development of performance benchmarks for public and private real estate as such measures are one hallmark of high levels of transparency in the real estate industry, the report points out.
Chile stands out for its high transparency score, particularly in the regulatory and legal and transaction process sub-indices. Brazil continues its longer term improvement in transparency although, like many other countries, its rate of improvement has slowed over the past two years. In particular Brazil has progressed in the performance measurement category due to the recent introduction of real estate securities indices. Mexico though has seen very little change in transparency since 2008 with a minimal change in its overall score.
Argentina is again ranked the fourth most transparent country in Latin America but continues to have low scores in performance measurement and market fundamentals.
The report concludes that some of the first forays into private and public indices to benchmark investment performance should lay the foundations for future improvements in transparency across the region.
