Supply of Distressed Property Falls in China

Global supply of distressed property expected to rise in Q4 2011; demand moderates

Demand falls in Brazil, Portugal and Hong Kong

HONG KONG, Nov. 30, 2011 /PRNewswire-Asia/ -- The RICS Global Distressed Property Monitor is a quarterly report that reveals trends in 25 commercial property markets across the globe. A distressed property is defined 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. 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.

Investor demand for distressed property in China still far outstrips expected supply this quarter; continuing a trend which began 12 months ago. The pace of rising investor demand did moderate somewhat in Q3, but still remains strongly positive. Looking ahead, the supply of foreclosed property coming to market is expected to decline over the near term at roughly the same pace as seen in Q2, with the net balance score moving from -20 to -18. Despite some negative news flow regarding the residential sector more recently, the commercial sector remains reasonably well underpinned. According to the latest RICS Global Commercial Property Survey, property professionals expect rents and capital values to continue to rise in the coming months.

Henry Li, Chairman of RICS China said, "In the second half of this year, the Chinese government further tightened monetary controls on the real estate sector; most banks reduced loans and leveraged on properties to secure financing. Meanwhile, some property securitisations and IPOs projects were frozen, the mainland's real estate investment volume continued to drop. Despite the Government's tightening control on the residential sector, we do not expect to see a strong growth in distressed sales in coming year, as the China economy is expected to grow and perform stronger than the western countries."

The global supply of distressed property is expected to rise in Q4 2011, according to property professionals in key real estate markets. 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.

The supply of distressed property in Q4 2011 is expected to contract in Brazil, Russia, mainland China, Canada and Hong Kong, while investor demand picked up in Malaysia and the Czech Republic, where net balance scores moved from -13 to +29 and -7 to +5, respectively, quarter over quarter.

Mr Denys Kwan, External Affairs and Public Concerns Committee member of RICS Hong Kong, said, "The distress property market in Hong Kong is quite different from the global market. Currently there are 50 to 60 distressed properties in Hong Kong market, which saw a continued reduction in Q3. This can be accounted by the relatively stable prices of new flats. But considering the quiet second-hand property market conditions in recent months, the impact may be felt in around six months."

Regional Highlights

India
Property professionals in India report rising levels of investor interest this quarter, though the net balance has moderated from +51 to +20, suggesting the pace of rising demand is slowing. Expected levels of supply continue to increase for Q4 as well, although at a slightly slower pace than in Q2.

Russia
Reversing the trend seen last quarter, levels of demand by specialist funds fell in Q3, with net balance scores moving into negative territory (+17 to -3, quarter over quarter). According to the survey, a decline in the availability of distressed property is still expected in Q4, although at an even slower pace than seen previously.

UK
Levels of distressed property expected to come to market in Q4 look set to pick up from the previous quarter although, to date, this flow has been reasonably well managed thereby limiting the direct impact on pricing of real estate more generally.

Net Balances: Net balance percents are calculated by subtracting the numbers of respondents reporting 'down' from the number who reported 'up'.

About the Survey: The RICS Global Distressed Property Monitor, a subset of RICS' Global Commercial Property Survey, is a quarterly report that reveals distressed property trends in 25 commercial property markets across the globe.

Respondents were asked to compare conditions in Q3 2011 to conditions in Q2 2011. Responses for this survey were collected until 23 September 2011 and amalgamated, at a country level, across the three real estate sub-sectors of offices, retail and industrial property to form diffusion indices for the commercial market as a whole.

Please download the full report from the below link:
http://www.ricsasia.org/newsDetail.php?id=459&regionID=0

About RICS & RICS Asia

RICS is the world's leading qualification when it comes to professional standards in land, property and construction.

In a world where more and more people, governments, banks and commercial organisations demand greater certainty of professional standards and ethics, attaining RICS status is the recognised mark of property professionalism.

Over 100,000 property professionals working in the major established and emerging economies of the world have already recognised the importance of securing RICS status by becoming members.

RICS is an independent professional body originally established in the UK by Royal Charter. Since 1868, RICS has been committed to setting and upholding the highest standards of excellence and integrity – providing impartial, authoritative advice on key issues affecting businesses and society. RICS is a regulator of both its individual members and firms enabling it to maintain the highest standards and providing the basis for unparalleled client confidence in the sector.

The RICS Asia supports a network of over 11,000 individual professionals across the Asia Pacific region with an objective to help develop the property and construction markets in these countries, by introducing professional standards, best practice and international experience. It promotes RICS and its members as the natural advisors on all property matters. It also ensures that services and career development opportunities are provided to members.

The RICS Asia region covers national associations and local groups locating in Brunei, Malaysia, Singapore, Thailand, The People's Republic of China and the SAR Hong Kong. It also has members working across the region such as Bangladesh, Bhutan, Burma/Myanmar, Cambodia, Indonesia, Japan, Kiribati, Laos PDR, Macao, Mongolia, Nepal, North Korea, South Korea, Taiwan, The Maldives, The Philippines, Timor East and Vietnam. For more information, please visit: www.ricsasia.org.

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