GLOBAL - The growth in distressed real estate transactions has slowed according to research from the Royal Institution of Chartered Surveyors (RICS).

More than 85% of countries surveyed by the organisation reported a slowdown in the number of distressed sales during the second quarter of 2010.

An increase in distressed deals was reported in 13 out of the 25 countries covered, with the largest growth found in Portugal, followed by the US and Republic of Ireland.

However, the pace of increase moderated across the majority of markets with only three countries reporting that distress in the market is increasing at a faster pace than last quarter: Portugal, Spain and Germany.

There were eight countries that actually reported a decline in the number of distressed properties coming to market, led by Brazil, Russia, India and Hong Kong.

Japan, where expectations for distressed opportunities have been high since the start of the downturn, also saw distressed sales shrink during the second quarter after reporting growth in the first quarter. Other countries showing marginal declines were Canada, Australia and China.

Real estate professionals expect the number of distressed properties coming onto the market in the third quarter of 2010 to increase further among 14 of the 25 countries surveyed (down from 18 in the previous quarter).

Respondents in Portugal and the Republic of Ireland expect to see the fastest growth in activity followed by US, Spain and Scandinavia. However, agents in Brazil, China, Hong Kong, Canada and India expect distressed sales to continue to decline.

"Growth in distressed listings eased back globally outside of Portugal, Spain and Germany in the second quarter," said Oliver Gilmartin, senior economist at RICS.

"That said, distressed listings are still rising albeit at a slower pace in much of the rest of Europe and the US. A clear divide appears to be opening up between these markets and the rest of the world."

He added: "Worries over the health of the European banking system will continue to linger, propelling banks to manage down their problem loan books. Indeed, changing international regulations are likely to start raising the cost of capital of holding commercial property on bank's balance sheets, which could be the trigger for increased listings in the coming year."

Topics