Clear improvements in market transparency

  • 2004-04-01
  • By Steven Paulikas
VILNIUS - While increasingly prudent governmental regulation of the real estate market has over time created a more appealing environment for investors, many in the Lithuanian real estate business believe that more needs to be done to attain sufficient levels of transparency.

Such was the message of a report released in late March by Koba, a real estate consultancy, and the law firm of Jurevicius, Balciunas and Partners.
The authors of the report argue that while the real estate market in Lithuania has seen a surge in recent years due to high expectations sparked by EU accession, the market's full potential has been hindered by a lack of full transparency.
According to Valdemar Ivasko, senior consultant at Koba, loose regulations regarding record-keeping in transactions has led to unacceptable opacity, making it impossible for potential investors to make an intelligent analysis of the market.
"Imagine a daughter company sells a property to its parent company. This sale enters the register, but it distorts an analysis of the market. The same would be true of the sale of a building for a very high price if the record does not include the fact that the value of the land the building is sitting on was hidden in the price," Ivasko said.
Record-keepers argue that their methods give analysts enough information to evaluate the real estate situation regardless of dodgy transfers.
"We've been compiling data since 1998, and every year these data become more precise and useful," said Arvydas Bagdonavicius, assistant director of the Center of Registers, the state-held organization responsible for compiling information on real estate in Lithuania.
"There is no way for someone to hide information. Based on the information we provide, it is entirely possible to determine the nature of a transaction," Bagdonavicius insisted.
For smaller investors who do not have the apparatus of an intense analysis that could separate shady sales from legitimate ones at their fingertips, the Center of Registers issues an annual joint report on the state of the market together with their Latvian and Estonian counterparts.
In addition to opening the official records to tinkering, analysts further complain that the services offered by the Center of Registers are not freely available to all potential investors. With a subscription fee of 500 litas (145 euros) per month, the price for full Internet access to the center's real estate database may deter some investors, argue the analysts.
While recognizing the inconvenience caused by the fee, Bagdonavicius claims it is necessary for the center to continue operation.
"We may be a state enterprise, but we do not receive any government funds," he said. "We don't discriminate against anyone: Any legal entity or individual can subscribe, and practically all of our services are now available online."
In spite of the complaints of some, there is widespread agreement that transparency in Lithuanian real estate has greatly improved and will most likely continue to get better.
Kjetil Hanssen, director of Moller Real Estate in Vilnius, is optimistic about transparency.
"Five years ago things like gaining information about state auctions of property were still a problem, but now that's been cleared up. And the fact that transactions now have to conform to EU standards means there's going to be even more transparency," he said.