There is a growing acknowledgement of the central role that a transparent real estate sector plays in providing healthy, productive and competitive environments for communities and businesses, investment management company JLL global research head Jeremy Kelly said on Thursday.
Market transparency, he explained to delegates at the ninth yearly Africa Property Investment Summit and Expo, in Sandton, is the foundation which allows investors and corporate occupiers to operate and make decisions with confidence.
In turn, he pointed out that this enables governments and public bodies to function effectively, to provide long-term benefits to local communities and the environment through enhancing security of property ownership, safe housing and work places, as well as reliable and professional services.
However, he said real estate transparency and its relevance go well beyond the property investment and real estate industry.
Governments are increasingly recognising how a transparent real estate market can boost foreign direct investment, increase business efficiencies, enhance living standards and support and retain a safe environment.
“Transparency is an absolute imperative force for long-term planning, for the matters of economic growth and for the investment in high-quality urban infrastructure and housing,” Kelly averred, adding that this is “even more of an imperative” in sub-Saharan Africa, the world’s most rapidly urbanising region, with the world’s fastest growing cities.
TRANSPARENCY INDEX
According to JLL’s biennial Global Real Estate Transparency Index, transparency is improving in sub-Saharan Africa, although it is failing to match rising expectations.
The index, which quantifies real estate market transparency across 100 markets worldwide, is celebrating its tenth edition this year.
According to the index, with only 10 out of 15 markets in the sub-Saharan Africa region registering an improvement since 2016, the pace of change will need to accelerate to close the gap with other regions.
Africa is, however, not lacking in improvements, and has been led by the West and East Africa regional hubs of Nigeria and Kenya.
These regions, Kelly told delegates, were supported by greater data availability, improved valuation standards and government digitisation initiatives.
Rwanda, meanwhile, also continues to progress owing to a strengthened regulatory system, sustainability improvements and the introduction of online services.
Kenya and Nigeria have led improvements, according to Kelly, driven by the growing presence of global corporations and international real estate firms that are investing in those economies.
“They are also seeing improvements in the ease of transaction process, valuation standards as well as governments initiatives towards more open data and digitisation.”
New technologies, such as blockchain for land registries or ‘smart’ buildings and infrastructure, together with the digitisation of existing processes, offer an opportunity for sub-Saharan Africa to “leapfrog the traditional routes to transparency and improve methods of collecting market data,” Kelly said.
Across Africa, the transparency of regulations and practices remain at an early stage.
“With significant structural demand for modern infrastructure, housing and commercial real estate, progress is needed to ensure high-quality and sustainable new construction and urban environments,” Kelly pointed out.
Further enhancements in the ability to put new and existing regulations into practice are necessary for many sub-Saharan Africa markets to meaningfully raise their transparency levels, he explained, adding that an increasing market participation by institutional investors and the development of the listed sector are also key factors to enhancing transparency.
For Africa to continue its upward trajectory, Kelly noted that transparency will need to evolve further, and that the continent can “learn lessons from the rest of the globe”.
Africa can look towards countries such as the UK, in terms of performance benchmarks and in terms of its vibrant property industry; the US, with its deep real estate investment trust (Reit) structure and high corporate governance standards; and France, which leads the world in terms of sustainability and green building initiatives.
Each provides a pointer for global best practice, Kelly said.
Property technology, or proptech, the regulatory environment, deepening liquidity, the expansion of sustainability regulations and practices, will continue to shape real estate transparency in sub-Saharan Africa, he added.
Despite the signs of continuing progress, he pointed out that in Africa, the sub-Saharan Africa region has registered the slowest improvements of any global region, according to the index, with several areas where there is a significant opportunity to close the gap with other regions.
Sub-Saharan Africa, meanwhile, remains the global region with the lowest level of market data availability, with challenges relating to data collection, including relatively few independent research firms with the requisite staff and budgets to collect comprehensive and accurate data, a lack of industry forums for sharing information, low government data collection capabilities for urban infrastructure and relatively underdeveloped listed public Reit markets.
Looking ahead, both the index and Kelly believe that deeper engagement from international service providers, as well as a widening pool of funding sources and, crucially, improved regulatory enforcement, will all be required to meet the growing demand for transparency across the region.