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Distressed property listing up in Ireland, Spain, South Africa and the US

Its Global Distressed Property Monitor shows that while over half of the countries surveyed saw a moderation in the pace of listings, economic recovery poses new risks in the shape of rising interest rates in many markets.

Agents continue to be relatively pessimistic about commercial property for the coming quarter and two thirds are expecting an increase in distressed listings in the second three months of 2011, with half of these expecting levels to rise at a faster pace.

The survey, which covers trends in 25 commercial property markets across the globe in property that is under a foreclosure order or is advertised for sale by its mortgagee, also found that the largest decrease in distressed property is in Poland, Russia, Canada and Brazil.

Distressed property usually fetches a price that is below its market value. An increased rate of distressed properties entering a country's market can be seen as a negative economic indicator while a decrease may signal recovery.

Several countries witnessed substantial shifts in the availability picture this quarter. While the Ukraine saw a full swing from -17 in Q4 to +17 this quarter, indicating an increase in listings, Australia, Malaysia, Hong Kong and Scandinavia saw significant movement in the opposite direction.

In terms of quarter two, Ireland, Spain, Hungary and Italy expect the highest numbers of distressed properties to come to market, while Russia, China, South Africa and Poland expect the lowest.

Imbalances between the supply and demand of distressed property were highlighted in this quarter's report. In China, Hong Kong and South Africa, demand far outweighs expected supply. Demand also outweighs the expected supply in Germany and Australia, but to a lesser extent. On the other hand, in Spain, Ireland, Italy and the UK, expected supply far exceeds demand. As the year progresses, these imbalances could likely lead to further declines in price, RICS said.

‘As the global economy continues to strengthen, central banks must begin to address the spectre of rising inflation; a threat which is compounded in some markets by the continuing European sovereign debt crisis,’ said Simon Rubinsohn, RICS chief economist.

‘As a result, many central banks have either already tightened, or are thinking of tightening monetary policy; a step which brings new challenges for the commercial real estate market. Consequently, the distressed property forecast remains overcast,’ he added.