Is Japan truly a “highly transparent” market?

October 31, 2018 / By  

In the 10th edition of the biennial Global Real Estate Transparency Index (GRETI), Japan remained on the verge of the elite ‘Highly Transparent’ tier having made modest improvements since the last edition. The report covers 158 cities in 100 countries by quantifying 186 separate elements of transparency that are divided into six sub-indices:

  1. Performance Measurement: objective measure of real estate market
  2. Market Fundamentals: condition of data maintenance over time series
  3. Governance of Listed Vehicles: governance measures and information disclosure of real estate players
  4. Regulatory and Legal: in relation to real estate
  5. Transaction Process: fairness of real estate transactions
  6. Sustainability: approaches to a real estate environment

While Japan’s overall transparency ranking improved, lack of market information was a main reason behind the 36th rank on market fundamentals transparency sub-index. According to the survey, the top 11 “Highly Transparent” countries accounted for 75% of global direct investment, suggesting a close relationship between overseas investment capital inflow and market transparency rankings. Consequently, governments are keen to improve their country transparency as globalization trends sweep across markets.

One of the reasons behind Japan’s sluggish market fundamentals transparency rankings is the lack of disclosure on information pertaining to data and transactions. With higher inflow of overseas investment capital, the requirement of such data for investment decisions has become more crucial that before. Hence, the pressure to maintain and disclose such information has directly increased the demand for a comprehensive database.

As seen in other countries, technological innovation is expected to penetrate the real estate industry. Similar to fintech’s infusion of finance and technology, the real estate industry will be propelled by proptech, where real estate and technology will work in tandem.

By applying and utilizing new technologies, real estate agents will help to improve the collection of data. With that direction in mind, domestic companies that maintain competitive superiority by keeping data internally, will be required to adopt a platform that accumulate and analyze open data.

Whether this initiative will be undertaken by the government or third-party solution providers is still to be determined, the demand for information disclosure will continue to rise. In order for Japan to win in today’s global competition, improvement in transparency rankings need to take place and hopefully in time for the next GRETI edition in 2020 – and what better time than to tie in with Olympics in Tokyo.

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