Local real estate market one of the world’s worst in terms of financial disclosures – JLL index

The Macau SAR ranked 58th in the 2020 Global Real Estate Transparency Index created by real estate service company Jones Lang LaSalle (JLL) and despite going up two places from the previous report, was again categorised as a ‘semi-transparent’ market.

The index also ranked the Macau SAR as one of the worst in terms of the transparency in the financial disclosure and corporate governance requirement of listed real estate vehicles, in par with jurisdictions such as Lybia, Rwanda and Iran.

The index defines its governance of listed vehicles score by analysing, stringency of accounting standards, level of detail in financial statements, frequency of financial statements, data disclosure by listed vehicles, availability of financial reports in English, corporate governance, manager compensation and incentives, use of outside directors and international corporate governance best practice, alignment of interests/shareholder power, free float share of the public real estate market

The biennial index is based on a combination of quantitative market data and surveys results across 99 countries and territories, with 210 individual measures divided into 14 topic areas.

These categories are then grouped and weighted into six broad sub-indices​​, namely, performance measurement, market fundamentals, governance of listed vehicles, regulatory and legal, transaction process, and sustainability, which each receives a score on a scale of 1 to 5, with 1.00 being the highest possible score, with an overall score then handed to each jurisdiction.

Different real estate markets are assigned to one of five transparency tiers, highly transparent, transparent, semi-transparent, low transparency, and opaque.

In total, the Macau SAR receiving a 3.49 score – the same score as the previous index – and ranked 43 places below Hong Kong, which in 15th was listed as a transparent market and received a 2.03 score.

Macau’s best score granted by the JLL index was attributted to its regulatory & legal framework category (2.34), followed by transaction processes (2.72), market fundamentals (3.27), investment performance (4.26), sustainability (4.27), and with governance of listed vehicles – which covers financial disclosure and corporate governance – receiving a maximum negative score of 5.00.

Macau was one of the 25 countries and regions that received a maximum negative score for the governance of listed vehicles.

JLL indicated that Hong Kong ranked second only to Singapore in 14th position, among the indexed Asian markets, with Shanghai and Beijing elevated into the ‘Transparent’ tier for the first time, both ranking in 32nd, due to their improvements in market fundamentals data, an active proptech sector and more coordinated planning of land use.

‘Hong Kong’s real estate market has strong regulatory frameworks, transaction processes and governance structures. Furthermore, we see the adoption of proptech platforms, digital tools and ‘big data’ techniques are increasing in this market, which has improved transparency as a result. The city could elevate into the ‘Highly Transparent’ tier if it could improve its sustainability transparency, which could be learnt from those in the ‘Highly Transparent’ market,’ Roddy Allan, Chief Research Officer at JLL in Asia Pacific stated in the index.