The effects of the credit crunch, recession and subsequent lack of loan availability from banks and building societies has caused a dramatic increase in the number of distressed property sales coming to the market in recent months, particularly in the commercial loan sector of the property market, according to a new survey by the Royal Institute of Chartered Surveyors (RICS).

RICS not only looked at the property market in the UK, but also across the world and found a similar story across the globe, with around 80 per cent of all countries seeing an increase in commercial property loan defaults, leading to distressed property sales.

The distressed property market is where a home owner, or commercial property owner, has not been able to keep up with the loan repayment on their home owner loan or commercial loan, with the end result of them falling into arrears and eventually defaulting on the loan and the lender repossessing the property. The lender will then attempt to sell the repossessed property as quickly as possible in order to recoup its losses on the loan.

RICS found that, although the number of distressed property sales were increasing globally, banks were generally becoming more lenient in their approach to dealing with loan arrears and were not foreclosing quite as quickly on the loan as they have done in previous months.

Oliver Gilmartin of RICS said “Distressed property listings are likely to become a bigger feature of the global property landscape in the coming year as loan refinancing and improved pricing in some markets, provides a window of opportunity for banks to manage down some of their property loan exposure. Record low interest rates may have helped some corporate tenants meet income cover obligations for now and held back the rise on distressed listings.  Despite unconventional monetary measures across some economies, the reluctance of banks to extend lending remains one major obstacle to a buoyant occupier recovery.”