Distressed commercial property sales increasing around the world
Over 80% of key real estate markets around the world have seen a rise in distressed sales in the commercial property market, according to new research.
The survey by the Royal Institution of Chartered Surveyors of its members in 25 countries found that the biggest pick up in distressed sales was in South Africa, the US, Portugal and France in the third quarter of 2009.
Other countries also reported an increase compared with the second quarter of the year but the growth was slower.
Only China, Hong Kong and Brazil reported a decline in the number of distressed properties coming onto the market.
Looking ahead, real estate professionals said that they expect the number of distressed properties coming onto the market to increase into the fourth quarter across 19 of the 25 countries surveyed.
Russia, the US, Spain and Ireland are expected to see the biggest rise with New Zealand, Italy, Malaysia and Germany next in line.
However, surveyors are more optimistic in Brazil, Hong Kong and India and expect fewer distressed property listings in these countries.
As RICS members work on both sides of any distressed property transaction, they were also asked whether the level of interest from specialist funds in distressed properties was increasing.
Levels of interest rose across 18 out of 25 countries and at a faster pace than the previous quarter with China, Russia, Australia, India and the Ukraine leading the way.
RICS also asked member firms and agents to comment on the speed at which they thought banks are foreclosing on commercial property deals compared to three months earlier.
Encouragingly, respondents suggest that as yet, banks are not overly hasty on foreclosing on properties in breach of loan agreements with less than two in ten surveyors reporting an increase in the speed of foreclosure which was in line with the previous quarter.
‘Distressed property listings are likely to become a bigger feature of global property landscape in the coming year as loan refinancing and improved pricing in some markets, provides a window of opportunity for banks to manage down some of their property loan exposure,’ said Oliver Gilmartin, RICS senior economist.
‘Record low interest rates may have helped some corporate tenants meet income cover obligations for now and held back the rise in distressed listings.
However, with the destocking process drawing to a close in some markets companies may worryingly find themselves more reliant on banks to meet their working capital needs in order to replenish stocks.
Despite unconventional monetary measures across some economies, the reluctance of banks to extend lending remains one major obstacle to a buoyant occupier recovery,’ he added.