During the third quarter of 2009, RICS surveyed members and other real estate executives in 25 countries across the globe to ascertain the volume of distressed sales in the commercial property market. Respondents in 80% of the countries surveyed reported an increase in distressed sales compared to three months earlier. The biggest pick up in distressed sales was reported in South Africa, followed by the US, Portugal and France but the pace of increase moderated across the majority of markets compared to the second quarter. However, China, Hong Kong and Brazil reported a decline in the number of distressed properties coming onto the market.
Looking ahead, real estate professionals expect the number of distressed properties coming onto the market to increase into the fourth quarter across 19 of the 25 countries surveyed. Russia, 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.
RICS members work on both sides of any distressed property transaction. Consequently, the survey asked surveyors 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.
Commenting, Oliver Gilmartin, RICS senior economist said: "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
“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."
