The expected supply of available distressed property is expected to rise more quickly in Europe than any other world region in the first quarter of 2011, and notably in Ireland, Hungary, Germany and the UK, finds the Q4 2010 RICS Global Distressed Property Monitor.
The survey for Q4 suggests a small fall in the level of specialist funds interest in distressed property, down from 21 countries in Q3 to 18 in Q4 2010, and a rise in distressed properties coming to market. This trend looks set to continue into Q1 2011, with property professionals in 64% of countries covered reporting an expected increase in distressed property coming to market in the coming three months.
In Q4 2010, agents in 15 countries reported a rise in levels of distressed property as compared to 13 in Q3; Australia and Germany saw the most notable up-ticks. Looking ahead to Q1 2011, distressed property listings are expected to rise at a faster pace in 40% of the countries covered. Agents in the Republic of Ireland, Hungary, the UK and Germany expect the biggest increases in distressed listings, while agents in Australia and Portugal are also expecting higher levels of activity. Agents in Russia and Brazil, however, expect to continue to see declines.
In Q4 2010, the Ukraine experienced the most dramatic fall in the pace of investor interest, while interest rose in the Republic of Ireland, UAE and Spain. France saw the largest rise in investor interest overall, however, with net balance percents moving from 0 in Q3 2010, to +25 for this quarter.
Commenting on the survey, Simon Rubinsohn, RICS Chief Economist said: "The prospect of more distressed property in real estate markets that are still under severe pressure will inevitably compound the squeeze on pricing. However, in those parts of the world where commercial property is enjoying more of a recovery, the prospect of further distressed assets will have only a very limited impact. Significantly, according to our survey the level of distress expected to come to the market in Brazil, Russia and China is set to drop from what already were modest figures.''
Other regional highlights:
While agents reported a decrease in the pace of investor interest, from +35 down to +11, quarter over quarter in Q4 2010, also saw the most substantial decrease in the pace of distressed properties coming to market, moving from net balance scores of -29 to -63. This decrease in availability is expected to continue into Q1 2011.
While still in positive territory, China did experience a slow down in the pace of growth in investor interest in distressed property quarter over quarter, moving from a net balance percent of +42 to +26. In addition, agents report a change in sentiment relative to depressed property coming to market in Q1 2011. From a net balance score of +4 in Q3, property professionals have now posted a net balance score of -11, indicating the expectation that far fewer distressed properties will be available in Q1 2011.
Property professionals in Germany reported a considerable rise in the number of distressed properties on the market in Q4 2010. More worryingly, the expected level for Q1 2011 has skyrocketed. Net balance scores have moved from -23 to +43, quarter over quarter, representing a highly pessimistic view of property markets for the first part of the New Year. Separately, the interest level from specialist funds has also fallen considerably Q3 to Q4.
Although still positive, the pace of interest from specialist fund investors eased over the course of Q4 2010 in India, moving from a net balance score of +11 to +5. The number of distressed properties coming to market is expected to increase only slightly in Q1 2011.
For Q4 2010, agents in Russia reported a less dramatic fall in the number of distressed properties coming to market, -18 as opposed to -53 in Q3 2010. Interest by specialist investment funds was neutral, while the level of available distressed properties is expected to continue to fall i