RICS: Global Demand for Distressed Property Rises Dramatically in Q2 2011

Demand expected to outstrip Q3 supply in over half of countries surveyed

HONG KONG, Aug. 23, 2011 /PRNewswire-Asia/ --

RICS Global Distressed Property Monitor Q2 2011

Worldwide demand for distressed property increased dramatically in Q2 2011, finds this quarter's RICS Global Distressed Property Monitor. Over 80 percent of the countries surveyed reported heightened levels of interest from specialist funds in Q2 with three-quarters of these reporting even greater levels of demand than last quarter. Indeed, in over half of the countries covered, the net balance figure for Q2 demand for distressed property outstrips the comparative number for Q3 expected supply, most noticeably in Japan, mainland China, Singapore and Hong Kong.

Denys Kwan, Member of External Affairs and Public Concerns Committee, RICS HK, commented,  "Property transactions have slowed down a bit since the announcement on June 10, by the Monetary Authority, on further tightening of mortgage lending. The general price level has dropped by 3-5% since then. The average number of distressed properties in the market for sale in Q2 was around 50 per month, more or less the same as the previous 2 quarters. Demand for properties, whether distressed or not, is still strong in HK. A few years back, distressed property used to sell at around 20-25% lower than market price. But for the past 2 years, they were sold generally at around 10-15% discount."

Investor demand rose most dramatically in Japan and Hungary this quarter, where net balance scores moved from +6 to +68 and +3 to +64 quarter over quarter, respectively. In Italy, Poland and Russia agents reported noticeable shifts in sentiment with demand swinging from negative into positive territory.

Property professionals in the majority of countries surveyed expect the level of available distressed property to rise in Q3 2011. Not surprisingly, the Republic of Ireland, Spain and Italy have the highest readings for the levels of foreclosure, while Brazil, Malaysia and Russia have the lowest. Interestingly, agents in South Africa report a dramatic shift in sentiment and now expect a substantial rise in distressed property for Q3, in contrast to the negative net balance score posted in Q1 2011.

China

Levels of distressed property coming to market in China are still expected to decline in Q3 2011, although somewhat less so than the previous quarter, with net balance scores moving from -34 to -20. Levels of demand by specialist funds, while still positive, also moderated in Q2. Looking ahead, however, demand for distressed property is still expected to far outstrip supply in this country which is consistent with the projection for further price gains in the commercial market.

Russia

Property professionals in Russia anticipate a continued decline in the level of distressed property for Q3, albeit at a slower pace than in seen previously. In contrast, agents report a full-scale positive swing in investor demand as net balance scores moved from –11 in Q1 to +17 in Q2. It therefore looks likely that distressed property prices in this country will stabilise over the course of the coming quarter.

UK

The expected supply of distressed property in Q3 looks set to far outweigh investor demand as supply continues to increase (at an even faster rate) and investor demand contracted slightly this quarter. This is despite the Bank of England's stance on keeping interest rates at just 0.5 percent. The current uncertainty regarding the economic picture should mean the Monetary Policy Committee continues to sit on the policy sidelines for some time to come giving some breathing space for the property sector.

About the Survey

The RICS Global Distressed Property Monitor, a subset of RICS' Global Commercial Property Survey, is a quarterly report that reveals distressed property trends in 25 commercial property markets across the globe. Respondents were asked to compare conditions in Q2 2011 to conditions in Q1 2011. Responses for this survey were collected until 27 June 2011 and amalgamated, at a country level, across the three real estate sub-sectors of offices, retail and industrial property to form diffusion indices for the commercial market as a whole.

About RICS & RICS Asia

RICS is the world's leading qualification when it comes to professional standards in land, property and construction.

In a world where more and more people, governments, banks and commercial organisations demand greater certainty of professional standards and ethics, attaining RICS status is the recognised mark of property professionalism.

Over 100 000 property professionals working in the major established and emerging economies of the world have already recognised the importance of securing RICS status by becoming members.

RICS is an independent professional body originally established in the UK by Royal Charter. Since 1868, RICS has been committed to setting and upholding the highest standards of excellence and integrity – providing impartial, authoritative advice on key issues affecting businesses and society. RICS is a regulator of both its individual members and firms enabling it to maintain the highest standards and providing the basis for unparalleled client confidence in the sector.

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