US, Ireland, Spain and South Africa see largest increases of distressed RE for sale

A poll of property brokers by Britain's RICS has concluded that the level of distressed property for sale listed on agents’ books in the first quarter of the year increased most in North America, Ireland, Spain and South Africa than in other markets.

The US, the Republic of Ireland, Spain and South Africa saw the largest reported increases in distressed property for sale on brokers’ books in the first quarter of the year, according to a regular poll.

The Royal Institution of Chartered Surveyors’ Global Distressed Property Monitor highlighted Ireland in particular where its measure of distressed property for sale “surged” and South Africa, where pick-up was “dramatic”. The level of distressed property coming to the market in the UK rose in the quarter also.

At the other end of the spectrum, the survey picked out Poland, Russia, Canada and Brazil, as having witnessed the biggest decrease in distressed property listed on brokers’ books.

The study concluded that the overall pace of rising distressed property listings “tempered” in Q1, with more than half of the 25 markets surveyed seeing a moderation in the pace of distressed listings. Despite that, many brokers still expect an increase in distressed listings to have occurred in the second quarter, the results of which will be revealed later in the year.

Respondents were asked to compare conditions in Q1 2011 to conditions in Q4 2010 and responses were collected until the end of March – and released today.

The RICS defines a distressed property as a property that is under a foreclosure order or is advertised for sale by its mortgagee. Distressed property usually fetches a price that is below its market value, added the RICS. An increased rate of distressed properties entering a country’s market can be seen as a negative economic indicator while a decrease may signal recovery, it pointed out.

Perhaps more significantly for opportunity funds, the RICS said today that it expected Q2 results to show up Republic of Ireland, Spain, Hungary and Italy as having the highest numbers of distressed properties to come to the market, while Russia, China, South Africa and Poland are expected to have the lowest.

Simon Rubinsohn, RICS chief economist, said: “As the global economy continues to strengthen, central banks must begin to address the spectre of rising inflation, a threat which is compounded in some markets by the continuing European sovereign debt crisis. As a result, many central banks have either already tightened, or are thinking of tightening monetary policy, a step which brings new challenges for the commercial real estate market. Consequently, the distressed property forecast remains overcast.’’