Property Investment Regulation Inspires Confidence

Union Investment's Investment Climate Index, which tracks attitudes and expectations among European real estate professionals at six-month intervals, recently moved up to 67.5 points, which is where the index stood in autumn 2009....

Union Investment's Investment Climate Index, which tracks attitudes and expectations among European real estate professionals at six-month intervals, recently moved up to 67.5 points, which is where the index stood in autumn 2009.

The general upward trend is feeding off an increased optimism on the part of investors, with Germany, France and the UK's real estate sectors helping to bolster the current climate. However, while confidence appears to be returning in the major European markets, further afield investors appear more hesitant.

A new survey, conducted by Arabian Business, has found that a significant number of international buyers in the Gulf region are keen to see more regulation introduced to the markets.

In excess of 70 per cent of those questioned revealed that additional protection measures would contribute towards inspiring more confidence in the sector, which has been hit hard in recent times.

Indeed, a number of failed or halted developments have caused many speculators to give the market a wide berth, with a lack of guarantees that projects will be completed leading to a climate of ambiguity.

This helps to explain the tiny number of respondents (2.2 per cent) who claim to be happy with current laws regulating the markets in the region. Currently, the only option for investors of a stalled or cancelled project is the civil courts, which have seen an increase in disputes in the wake of the global financial crisis.

However, steps have been taken in the United Arab Emirates to ensure that this uncertainty is addressed.

The introduction of the Strata Law last month aims to give property investors and developers a government guarantee that work will be completed. Some 40 projects are currently under the jurisdiction of the Land Department - backed Tayseer scheme which covers buildings which are under construction or almost finished. The first phase of the initiative is aimed at boosting liquidity in the market and bolstering confidence in the sector, explained Sultan bin Butti bin Mejren, director general of the Land Department. "Through this and other related initiatives the department is introducing a different, comprehensive and coherent level of strategic management to Dubai's property sector," he said. "This will offer clear transparency and in doing so inspire confidence among developers, end users and all those with an interest in Dubai's property sector."

Once a project had been examined and approved for Tayseer, it receives the Tayseer trademark, and a government guarantee that it will be completed and by a specific date.

However, it is not just buyers in the Middle East that require protection against their investments.

The UK's property ombudsman recommended earlier this year that the government ensure more effective regulation of letting agents.

Christopher Hamer sees this as a way to offer residential landlords, as well as their tenants, a higher level of protection against abuse or poor service. He reached the decision that more regulation was necessary after seeing a rise in the number of landlords and Buy to Let investors submitting complaints against letting agents which in his opinion means greater oversight is required. Mr Hamer believes that this is an issue of consumer rights protection, and the public sector can play a role in ensuring that landlords enjoy certain protections and better service when they turn to letting agents.

The number of complaints filed against letting agents has soared and 49 per cent of the ombudsman's cases last year had to do with this sector. In addition, horror stories relating to land ownership issues in Spain and Greece have further highlighted the need for the markets to be regulated more effectively.

Buyer protection could be considered to be a vital component in ensuring the sector's recovery. It is fair to assume that for a country to boast a strong investment culture it is important to build a transparent and well regulated market.

Because of this, increasing regulation within the property sector worldwide should be considered a positive step, with it helping to reduce risk as well as ensure that important market data can be made available for potential buyers. And, post global economic crisis, should be used effectively by various governments to tempt investors back, as rising levels of transparency are often associated with an increase in foreign direct investment.

Individuals looking to invest in property are increasingly demanding to be provided with more detailed and better information relating to market fundamentals, while governmental agencies continue to work hard to progress regulatory and legal procedures around the globe.ADNFCR-3415-ID-19911173-ADNFCR

- Thursday 29 July 2010

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