Distressed property sales ease: RICS

The growth in distressed property listings eased back in more than 85% of the countries surveyed in a global report by RICS. In the second quarter, 13 out of the 25 countries surveyed reported an increase in distressed sales, down from 17 countries in the previous three-month period.

Portugal saw the largest growth in distressed sales, followed by the US and the Republic of Ireland. However, the pace of growth moderated across the majority of markets with only three countries - Portugal, Spain and Germany - reporting that distress in the market is increasing at a faster pace than in the last quarter .

By contrast, eight countries reported a decline in the number of distressed properties coming to market compared to the previous quarter. The pace of decline was greatest in Brazil, Russia, India and Hong Kong. Interestingly, surveyors in Japan indicate a modest turnaround, where the net balance fell from +19 to -6. 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 in 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 the US, Spain and Scandinavia.

However, there is positive news from Brazil, China, Hong Kong, Canada and India where agents expect distressed sales to continue to decline.

Oliver Gilmartin, RICS senior economist commented: 'Looking ahead, despite the supposedly successful European bank stress tests, 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.'