RICS Global Distressed Property Monitor Q3 2011

The global supply of distressed property* is set to rise through to the end of the year as economic turmoil in the Eurozone lingers. In Europe, while Germany and Russia and seem to weather the storm, commercial property markets find themselves facing increasingly downbeat conditions, says the latest RICS Global Distressed Property Monitor published today (28 November).

The report finds that negative sentiment is spreading across the globe, with almost three-quarters out of the 25 countries surveyed anticipating rising levels of foreclosure in the coming quarter. Most importantly, property professionals who answered the survey expect that supply will outstrip demand in 60% of the countries covered by the survey, a sharp 20%-increase compared to the second quarter.

On the bright side, commercial real estate markets in China and Brazil are still prospering, with both countries expecting the number of foreclosed properties coming to the market to decline over the near term. In Europe, Germany and Russia also remain fairly stable in spite of high levels of economic uncertainty. In Germany, interest in distressed properties slightly rose from July to September with respondents predicting that the number of foreclosures coming to the market is expected to stabilise over the coming months. In Russia, while levels of demand by specialist funds fell during the third quarter, the supply of distressed properties is also expected to decline from now until the end of the year.

Other European commercial property markets have again weakened amid fears of the crisis intensifying in Greece and the political instability in debt-burdened Italy further threatening the single currency. RICS members in France who answered the survey, continue to feel the effect of this highly volatile context, and they forsee a considerable rise in the number of expected foreclosures over the coming months as investor interest – while still positive – is slowing down.

Predictably, Italy, Portugal and Spain are worst hit with the number of distressed properties coming to the market expected to far outweigh demand until the end of the year.

Commenting on the survey RICS Chief Economist Simon Rubinsohn said:
“The deteriorating picture is most pronounced in the Southern European** countries, which remain at the centre of the euro crisis. Meanwhile, investor appetite for distressed assets is cooling in the face of continuing uncertainty in financial markets and the worsening economic news flow. This being said, the worst fears of the market have yet to be realised with banks generally managing down their real estate exposure carefully.”