Its latest Global Distressed Property Monitor that reveals trends in 25 commercial property markets across the globe, suggests a small fall in the level of specialist funds interest in distressed property, down from 21 countries in the third quarter of 2010, to 18 in the last three months of the year.
It also shows a rise in distressed properties coming to market. This trend looks set to continue into the first three months of this year with property professionals in 64% of countries covered reporting an expected increase in distressed property coming to market in the coming three months.
A distressed property is defined as a property that is under a foreclosure order or is advertised for sale by its mortgagee. 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.
In the final quarter of 2010, agents in 15 countries reported a rise in levels of distressed property as compared to the previous quarter. Australia and Germany saw the most notable up ticks.
Looking ahead to 2011, distressed property listings are expected to rise at a faster pace in 40% of the countries covered. Agents in the Republic of Ireland, Hungry, the UK and Germany expect the biggest increases in distressed listings, while agents in Australia and Portugal are also expecting higher levels of activity. Agents in Russia and Brazil, however, expect to continue to see declines.
In quarter four the Ukraine experienced the most dramatic fall in the pace of investor interest, while interest rose in the Republic of Ireland, United Arab Emirates and Spain. France saw the largest rise in investor interest overall.
‘The prospect of more distressed property in real estate markets that are still under severe pressure will inevitably compound the squeeze on pricing,’ said Simon Rubinsohn, RICS chief economist.
‘However, in those parts of the world where commercial property is enjoying more of a recovery, the prospect of further distressed assets will have only a very limited impact. Significantly, according to our survey the level of distress expected to come to the market in Brazil, Russia and China is set to drop from what already were modest figures,’ he added.
The report also shows that both investor interest and distressed property levels were on the rise in the UK. Agents also expect an increase in distressed properties coming to market in the first quarter of 2011, but the rise is more gradual than that seen in other countries.
In Brazil agents reported a decrease in the pace of investor interest, from +35 down to +11, quarter over quarter, and also saw the most substantial decrease in the pace of distressed properties coming to market, moving from net balance scores of -29 to -63. This decrease in availability is expected to continue into 2011.
While still in positive territory, China did experience a slow down in the pace of growth in investor interest in distressed property quarter over quarter, moving from a net balance percent of +42 to +26. In addition, agents report a change in sentiment relative to depressed property coming to market in 2011.
In India, although still positive, the pace of interest from specialist fund investors eased over the course of the last months of 2010, moving from a net balance score of +11 to +5. The number of distressed properties coming to market is expected to increase only slightly in the first quarter of 2011.
