Demand for distressed property rises dramatically

Wednesday, August 24, 2011
Published by MILLIE DYSON - myintroducer.com

Worldwide demand for distressed property increased dramatically in Q2 2011, finds this quarter's RICS Global Distressed Property Monitor.
Over 80 percent of the countries surveyed reported heightened levels of interest from specialist funds in Q2 with three-quarters of these reporting even greater levels of demand than last quarter.

Indeed, in over 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.

Issued today (24 August, 2011) 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.

Rise in supply of distressed property set to continue

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.

Commenting on the survey 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."

World regional Highlights

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 percent.

"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.

Brazil

Investor demand fell in Brazil this quarter, from a net balance of 0 in Q1 to one of -23. Looking ahead, agents expect the supply of distressed property to fall dramatically in the coming quarter as well, in contrast to last quarter's expectations for increased listings.

That said, the real estate market still remains firm with capital values generally thought likely to rise further over the coming months.

China

Levels of distressed property coming to market in China are still expected to decline in Q3 2011, although somewhat less so than the previous quarter, with net balance scores moving from -34 to -20.

Levels of demand by specialist funds, while still positive, also moderated in Q2. Looking ahead, however, demand for distressed property is still expected to far outstrip supply in this country which is consistent with the projection for further price gains in the commercial market.

France

Property professionals in France expect to see distressed property coming to market at a faster rate in Q3 than in previous quarters.

This, in conjunction with the fact that, according to the survey, investor demand continues to rise at a broadly steady pace suggests that supply will likely outstrip demand in the coming quarter.

Germany

Respondents in Germany registered only a small rise in the pace of investor demand this quarter.

However, agents still expect the supply of distressed property coming to market to increase next quarter albeit at a slower pace than previously as the net balance eased from +24 in Q1 to +15 for Q2.

The net balance reading suggests that demand from specialist funds will outstrip expected supply of distressed property in the coming quarter.

India

According to the survey, demand for foreclosed property in India looks set to surpass expected levels of supply in Q3 with demand from specialist funds appearing to rise dramatically in Q2 (the net balance climbed from +23 to +51, quarter over quarter). Meanwhile, the pace of supply is anticipated to rise only slightly.

Russia

Property professionals in Russia anticipate a continued decline in the level of distressed property for Q3, albeit at a slower pace than in seen previously.

In contrast, agents report a full-scale positive swing in investor demand as net balance scores moved from -11 in Q1 to +17 in Q2. It therefore looks likely that distressed property prices in this country will stabilise over the course of the coming quarter.

Iberia

Spain witnessed a rather strong surge in investor demand this quarter, moving from a Q1 net balance score of +24 to +56. Portugal saw an even stronger surge in the rate of demand, however, as net balance scores moved from +4 in Q1 to +53.

Both Spain and Portugal are in the top five in terms of expected levels of distressed property supply for Q3 2011, however, with net balance scores of +70 and +60, respectively.

Not surprisingly, therefore, property professionals in both countries report that expected Q3 supply will outstrip current levels of demand by specialist funds, which could add to the existing downward pressure on prices.

Looking for your budgeted dream home? Search ends here

Published on Mon, Aug 22, 2011 at 18:24 |  Source : Moneycontrol.com

The RBI has hiked its repo rate in an effort to contain inflation, for the 11th time since March 2010 and still inflation worries continue to haunt the common man currently.

One must be feeling the pinch of inflation with costs rising even with basic necessities of everyday living. In such a scenario if you have been saving all your life for a home and now find costs are too high to afford one, you may have to wear your thinking cap and mull over this again. Is this really the case or can you explore some more avenues to see if you can still make the dream of a budget home come true?
The key is landing a good deal. Now, how do you go about this? Here are a few tips. If in spite of exploring these you still want to wait, you should ofcourse do so this will help you save more money towards your down payment, in case you intend to procure a loan helping you save on interest outgo, or wade through aspects related to home loan eligibility.

Suresh, a commerce graduate working as an accountant for the past five years says that the IT boom and double income families has left people like him far behind in the race of life. Buying a home is not even a dream. To his surprise he discovered there are affordable homes for people in his state too! It just takes caution and research to land a home of your dreams. It is a difficult but not an impossible task.
Suresh's real estate agent has advised him to follow these guidelines:

Second hand homes: Suresh's agent showed him second hand or even older properties. The rates of these properties were considerably lesser than new construction properties. Hence, Suresh could get a greater square feet area for his budget or get the same square feet area he wants for a lower cost. Suresh's real estate agent promised to strike a good bargain for him. The idea is to look for a seller who is in urgent need of money or who wants to sell off the property at the earliest. Such a seller is more likely to bargain on the price and sell off the home at reasonable price, even below the marker quote. The flipside to this is ofcourse that if you plan to fund the home with a loan and not your own saved sources, you need to factor in a lot more than 20% of the down payment, as is the usual norm with home buyers. The reason for this - the down payment will increase proportionately with the age of the property.

Look for homes outside the main city: Suresh was looking for an apartment in a good neighborhood, which would have a small commute from work and also is in close proximity to his parents home. Hence he had not considered the option of apartments located outside the locality that he grew up in. Thanks to the advice from his agent he decided to broaden his area of search. The price range of apartments situated on the outskirts of the city is more within his range. Also, since it is not very far away from the city, his daily commute will not pose a problem. His agent also told Suresh that the added advantage of purchasing a property in the outskirts of the city is that they make good capital investments as they have greater potential to appreciate in value than properties located in the saturated markets within the city. Also, people avoid outskirts because of lack of facilities like grocery, restaurants etc. Nowadays that is also not a problem since these amenities become available as soon as an area gets populated.

Find a good bargain: Suresh's real estate agent informed him that a property under construction will cost him lesser than an apartment that is ready for him to move in. So, he encouraged Suresh to consider purchasing a home under construction by the builder. This is because Suresh is not in an urgent need to move into a new home. If he purchases an apartment even before the construction begins or is in its early stages, Suresh will get a better rate. However, he carries the risk of the construction not turning out to be exactly how he perceived it. Also, it is advisable to go with reputed property developers here. On the flipside, even reputed builders can sometimes become unpredictable when it comes to delivering completed properties on time, hence discuss with your legal counsel on the best measures to take regarding such an event. If talks with the builder are not fruitful, the only course of action sometimes is the legal route, which again comes with its own hassles and can take a long time to reach a conclusion. As far as possible be vigilant when you acquire your property from the start to the finish and have your legal counsel prepare you for unfortunate eventualities every step of the way. Else unpleasant surprises may jump at you on a later date!

Purchase property not in the best condition: The agent also suggested that Suresh could try the option of purchasing property that is not in a good shape as such properties are generally available at low costs. Suresh can then renovate the property to look the way he wants it to look. Generally, the overall cost should be less than the cost of buying a new property that is in a good condition. Hunting for a property that is not in the best condition can be very challenging. You need to rely on an expert who is able to guage the true worth of the property. The level of damage is critical and you need to factor in renovation costs for the property too before you take a call. Also, the bank will decide if they will be able to offer a loan for such properties only if it meets the bank's property evaluation norms.

Search for properties auctioned by banks: Banks generally auction properties that they have claimed from loan takers who have been unable to repay their dues. Such properties are sold at a distress value, which is around 15-20% lower than the market value. The information on such auctions are usually published in popular dailies as well as websites like http://www.foreclosureindia.com/. This is also a good bet to find a property at a bargain price. BankBazaar.com is an online marketplace where you can instantly get the lowest loan rates , compare and apply online for your personal loan , home loan , car loan and credit card from India's leading banks and NBFCs.

Assocham warns of NPAs in telecom, airlines, SMEs and agriculture

BS Reporter / New Delhi August 15, 2011, 0:11 IST

Though banks have shown improvement in asset quality over the years, a fast changing macro-economic scenario has thrown up renewed risks of accounts going bad in certain vulnerable sectors like telecom, airlines, small and medium enterprises (SMEs), and agriculture, says a study.

“There still remains a considerable scope for improvement in asset quality of Indian banking institutions and regulatory norms associated with them,” said the study conducted by the Associated Chambers of Commerce and Industry of India.

The report, however, appreciated that gross non-performing assets (NPAs) of all scheduled commercial banks now comprised two per cent of advances, compared to 15 per cent in the late 1990s. The study has revealed that public sector banks led the increase in NPAs.

Realising the risk that existence of high NPAs in one sector could lead to drying of credit flow to others, the study recommended adequate insurance schemes for SMEs and the agricultural sector to provide a meaningful cushion if the accounts turn bad.

The study also suggests debtor assistance programmes to ease the burden of unemployment, rising interest rates or devaluing currencies.

More, banks could be empowered to get a particular segment of clients’ business audited or verified by an independent entity to detect any possible warning signals, the study recommended.

Better service, lower charges

Dipta Joshi & Neha Pandey / Mumbai August 5, 2011, 0:09 IST

Switching loans allowed, but timing it becomes crucial.

The Damodaran committee report on customer services in banks, among other things, suggests ways to address common grouses on shifting loans, minimum bank balance and parity in floating-rate home loans to customers.

Disparity between old and new home loan borrowers is the most talked about. Bankers say a section of home loan borrowers feel even with the same profile, new customers are getting better terms. R S Sangapure, general manger (retail banking), Central Bank of India, says: “A new customer has higher bargaining power, since there are multiple choices in the market that he/she can take a look at, if a bank does not agree to offer him something special.”

For example, if you had taken a benchmark prime lending rate (BPLR) loan in 2006-07, you would have got it at 8-8.50 per cent. Today, you would not be paying anything less than 13-14 per cent. If you plan to take a housing loan today, you will get it at around 11 per cent. Difference = 2-3 per cent.
But, this parity can be brought about only in customers who have borrowed against the same benchmark rate – base rate or PLR – or the same category of borrowers, says K V S Manian, group head (consumer banking), Kotak Mahindra Bank.

Central Registry: A step towards secured lending

MR Umarji Aug 2, 2011, 01.49am IST
 
The object of setting up a secured transaction registry is to make security interests over property effective against third parties. In the event of a default by the borrower, the rights of enforcement are available to the creditor who can realise the value of the asset by selling it.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act recognises security interests over property and empowers lenders to enforce and realise securities in default. Such provisions are not linked to registration of the security interest in the central registry.

The Act has been in operation for the last nine years without registration requirements. Hence the object of setting up the central registry is to provide a database of security interests over property rights to secure loans and advances granted by banks and financial institutions.