The recent negative economic and financial climate has affected everyone, from employees to businesses and domestic landlords to commercial property owners; even in the aftermath, concerns regarding distressed properties are rife.
A distressed property, one which has been advertised for sale by the mortgagee or is under a foreclosure order, often fetches a price that falls short of its market value – an ideal investment for commercial property owners, one would think. However, theFinancial Times reported recently that low property prices have failed to spark the interest of buyers, and that yet more distressed properties were expected to come onto the market within the second quarter of 2011.
The property market is currently a bleak place, with professionals stating that the lack of commercial property investors is causing an oversupply of property – something that will clearly continue as the number of distressed properties increases with the fear of interest rate raises on the horizon. Nicholas Leeming, business development director of Zoopla, was quoted as saying, ‘this could make the economy more stable by promoting interest rates to remain low, and giving people more time to pay back their mortgage’. After the seemingly endless bleak days, full of reports of businesses going into administration, homeowners losing their properties and commercial property owners struggling to keep afloat, it would be a refreshing change indeed to see some positive reports.
But what does this tell us about the current financial climate? Andrew Smith, Global Head of Property at Aberdeen Asset Management, commented that, while the majority of the UK had a reasonably subdued forecast for the next six months, the supply and demand dynamics of the City of London were fairly healthy. That, combined with the fact that across the world the number of distressed properties coming to market has slowed, is said to be an indicator of a global financial recovery, or at least the onset of such an event. In itself, this can only be a good thing, both for commercial property owners and the economy as a whole.
