The Philippines needs to improve transparency in the real-estate market to draw in investments from sovereign wealth funds, according to Jones Lang LaSalle (JLL).
“Countries in the Asean [Association of Southeast Asian Nations] region, especially the Philippines, have moved from low transparency to semitransparency in 2014. Why is transparency important? In real estate, if we will go to holders of sovereign funds around the world, they are looking for markets with the highest degree of transparency. Most have been going to the Western part of the world,” Chris Fossick, managing director for Southeast Asia of JLL, said at the Asia CEO Forum. Sovereign funds, being state-owned funds, are capitalized from states’ pension investments, among other sources, and, thus, tend to be directed toward more transparent markets.
The JLL tracks the transparency of commercial real-estate markets of 102 economies in its Global Transparency Index (GTI), released every two years.
According to the GTI 2014, the Philippines belongs to the “semitransparent” group, having notched a ranking of 38 among 102 markets.
“Transparency relates to risk, from our view. There are risks of the country, and the risks around the real-estate sector. Part of the risks have to do with the legal system, the pricing of the real-estate market and the availability of information…the higher the transparency, the lower the risk assessment is from the investors,” Fossick said in a news conference. The GTI ranks real-estate markets on the transaction process and regulatory and legal processes, among other factors. The GTI 2014 states that real-estate transparency not only hinders inward investment but also has deep impacts on the quality of life of its citizens and their relationship with local government.
Lindsay Orr, CEO of JLL, noted that the perceived corruption in the Philippines has affected the country’s transparency rating. This is compounded by the concerns over the availability of market data.
On corruption, Orr noted the marked improvement of the Philippines over the years. Sovereign wealth funds are
currently being directed to more transparent nations, such as Australia, Japan and most Western nations.
Despite this setback, the global consultancy firm still sees a robust growth in the real-estate market in the coming years, credited to the predicted population boom in the Asean region
“One of the opportunities we see in the Asean region is the population growth. The growth is expected to rise from 624 million now to 665 million in the next five years,” Fossick said in his speech at the Asia CEO Forum.
The 40 million increase in the region’s population is expected to accelerate urbanization and increase household formation in the country. Moreover, this will be accompanied by a widening of the middle- income population, estimated at 19 million in Asean, to 30 million.