Ric`s Global Distressed Property Monitor Q3 2010
There has been a dramatic rise in the number of countries in which real estate professionals are reporting greater interest in distressed properties, according to a global report by Ric`s research published today. It also revealed that expectations for increased distressed property sales in the coming months are highest in the Republic of Ireland, US and Spain. Conversely, there is much more positive news from Hong Kong with 53 percent more respondents expect less distressed property coming to market in Q4 than did for Q3 (where only 17 percent expected less).
The survey asked respondents whether the level of interest from specialist funds in distressed properties was increasing. They indicated that 20 out of 25 countries experienced increased interest in distressed properties in the third quarter, compared to 11 in the second quarter. Growth in interest from specialist funds was highest in the Republic of Ireland and Spain although respondents have reported a pick up in interest across most markets with only Russia apparently seeing an easing of specialist fund interest.
The report continues to reveal that only a modest pick up in distressed properties coming to market at a global level but the largest declines in levels of distress are seen in Russia, Hong Kong and Brazil. The imbalance between interest in distressed property and expected distressed property coming to market is greatest this quarter in Hong Kong, where demand from specialist funds is far outstripping the growth in expected listings. This is also the case in Brazil, mainland China, Germany and Ukraine.
In terms of activity in the third quarter, there was a slight decrease in countries showing an increase in distressed properties coming onto the market – from 13 in the second quarter to 12 in the current quarter. In addition, overall distressed listings fell or grew at a slower pace during this quarter across most markets, with the exception of New Zealand, Italy, Spain, the UAE and Czech Republic.
Despite the slight decrease in the third quarter, respondents expect the number of distressed properties coming onto the market in the fourth quarter of 2010 to increase across 16 of the 25 countries surveyed – an increase of two countries over the last quarter. Professionals expect the Republic of Ireland, US, UK, Spain, Portugal and Hungary to show the biggest increases in distressed listings over the next quarter. Significantly decreases are expected for Russia, South Africa, Brazil and Germany – the latter experiencing the most notable turnaround in sentiment since last quarter.
Commenting, Oliver Gilmartin, Ric`s senior economist said:
“With the commercial property market recovery faltering across several countries in the third quarter, there is an expectation that banks might be becoming less lenient in extending terms for real estate loans. Renewed falls in rental values may also be making banks more nervous as to the size of their property loan books.
Significantly, specialist investors appear to be showing increasing interest in distressed property listings. However, ultimately banks hold the keys as to how the market for distressed property listings will evolve in the coming year.”
David Faulkner, Chairman of Ric`s Hong Kong commented:
“Inevitably the increase in the availability of distressed properties is in Europe, which has been hardest hit by the latest economic downturn. Conversely in many parts of Asia, high liquidity, the low cost of debt and low returns from other types of investments have maintained buoyant property markets, with limited signs of distress in the short term. Hong Kong is also benefitting from high liquidity in the real estate sector which limits the number of distressed properties available.”