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Distressed Properties Top Out: Now What?

By Phil Butler | November 28, 2011

In a story from the Wall Street Journal this morning the level of distressed properties around the world is expected to rise. The even worse news is, demand for said properties is expected to decline as well. What this means is, those inflated stories citing sales increases will cease to over inflate an already dismal economic consensus. When you next hear of sales volumes, a more true picture may be gleaned.

sustain
Frank Hovorka MRICS is in charge of real estate sustainability policy development at the French group Caisse des depots

Some key global markets were highlighted in the report, and include:

  • Global supply of distressed property expected to rise in Q4 2011; demand moderates
  • Supply expected to rise at its fastest pace in the Republic of Ireland, Southern Europe* and the UAE
  • Demand moderates in nearly 50 percent of countries surveyed; and falls in Brazil, Portugal and Russia

The news only makes sense really. As the most desirable distressed properties are absorbed by investors with funds left to snatch them up, the remaining properties are both less appealing, and the capital needed to buy is dried up. Add to this equation an overall less favorable economic situation worldwide; the eurozone failures, Asia slumping, and failed solutions all around, and not only are funds more protective and defensive, but overall confidence is eroded.

The Royal Institute of Chartered Surveyors(RICS) has estimated in this report, the RICS Global Distressed Property Monitor Q3 2011;

"Significantly, supply is expected to outstrip demand in 60 percent of countries surveyed (in terms of net balance reading). This contrasts to approximately 40 percent in Q2..."

Meanwhile, RICS Chief Economist, Simon Rubinsohn had this to add about the projections:

"Around the world, a further rise in the Q4 supply of distressed property is widely expected. So far, however, the worst fears of the market have yet to be realised with banks generally managing down their real estate exposure carefully. The deteriorating picture in the latest RICS report is most pronounced in the Southern European countries, which remain at the centre of the euro crisis. Meanwhile, investor appetite for distressed assets may be cooling a little in the face of continuing uncertainty in financial markets and the worsening economic news flow.”

Markets such as China, Germany, and to a degree France, seem a bit better in projections of demand, but there are no guarantees as the eurozone still faces a mountain if problems with fiscal validity.

For those interested, you can follow the RICS on Twitter here, or on Facebook, or read their reports via the links provided.

Feature image courtesy © caraman - Fotolia.com

Phil Butler is a former engineer, contractor, and telecommunications professional who is editor of several influential online media outlets including part owner of Pamil Visions with wife Mihaela. Phil began his digital ramblings via several of the world’s most noted tech blogs, at the advent of blogging as a form of journalistic license. Phil is currently top interviewer, and journalist at Realty Biz News.
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