The global supply of distressed property is expected to rise in Q4 2011, according to property professionals in key real estate markets.
The Q3 2011 RICS Global Distressed Property Monitor finds that roughly three-quarters of respondents expect rising levels of foreclosure next quarter.
Distressed property is expected to rise at the fastest pace in the Republic of Ireland, Southern Europe and the UAE, while agents in the UK, Hungary and France also anticipate increasing levels. Notably, in New Zealand and Poland supply expectations moved from negative into positive territory this quarter.
Significantly, supply is expected to outstrip demand in 60% of countries surveyed (in terms of net balance reading). This contrasts to approximately 40% in Q2.
On the demand side, property professionals in 19 of the 25 countries reported a rise in investor interest in Q3 (compared to 21 in Q2 2011), but the pace of demand reportedly fell in nearly half of these, most considerably in Hungary and Japan. Importantly, agents in Russia and Portugal reported swings in sentiment and net balance scores for investor demand moved from positive into negative territory.
That being said, bright pockets remain. The supply of distressed property in Q4 2011 is expected to contract in Brazil, Russia, China, Canada and Hong Kong, while investor demand picked up in Malaysia and the Czech Republic, where net balance scores moved from -13 to +29 and -7 to +5, respectively, quarter over quarter.
The RICS Global Distressed Property Monitor is a quarterly report that reveals trends in 25 commercial property markets across the globe. 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.
RICS Chief Economist Simon Rubinsohn said: “Around the world, a further rise in the Q4 supply of distressed property is widely expected. So far, however, the worst fears of the market have yet to be realised with banks generally managing down their real estate exposure carefully.
“The deteriorating picture in the latest RICS report is most pronounced in the Southern European countries, which remain at the centre of the euro crisis. Meanwhile, investor appetite for distressed assets may be cooling a little in the face of continuing uncertainty in financial markets and the worsening economic news flow.”