Global demand for distressed property soars

Indeed, in more than 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, China, Singapore and Hong Kong.

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.

The survey does, however, suggest that the supply of distressed property continues to outstrip demand in some countries, most noticeably in the Republic of Ireland, Italy and the UK.

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.

In the 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%. 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.

RICS Chief Economist Simon Rubinsohn said: "It is interesting to see agents reporting such a dramatic rise in investor appetite for distressed assets, quarter over quarter. To some extent, this may be seen as an encouraging development reflecting a measure of confidence in the outlook for the real estate sector despite the softer tone to the macro news flow. However, it needs to be borne in mind that the results are very country specific with generally negative numbers coming from those markets where the economic pain is most intense." 

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