Wealthy property investors predict US real estate recovery won’t appear until next year

Tycoon Sam Zell believes the recovery might get underway at the end of this year but will not gain strength until the middle of 2011. While billionaire Warren Buffet has told shareholders in his investment company that he believes the market will rebound next year.
 
‘Everyone is basing the real estate recovery on the general economic recovery, but we forget that the economy was driven by real estate growth and development between 2004 and 2006. So now we are back seven years before the general economy was doing positive things,’ explained Zell.
 
‘Since that time we have added many more challenges from the government in the form of regulations and taxation which will hamper future economic recoveries. Add into that all of the soft landing programmes that have kept us from hitting the bottom in residential real estate and it is hard to forecast accurately when the recovery will really start,’ he added.
 
Zell, who made his fortune investing in real estate, and sold Chicago-based Equity Office Properties Trust to Blackstone Group for $39 billion in 2007, said that the US housing market will start recovering toward the end of 2010 and strengthen in the middle of 2011.
 
Now chairman of Equity Residential, the largest publicly traded US apartment owner, Zell said real estate investment trusts (REITS) will have enough cash to boost dividends in the future.
 
Meanwhile in a letter to shareholders in his Berkshire Hathaway company, Buffet said he thinks that the demand curve will turn next year and the residential markets will start to improve. ‘I am sure this news is not what real estate agents are hoping to hear, I tend to agree. The housing market still has way too much overhang from foreclosures and short sales for buyers to have confidence investing in homes. Add to that a nervous economy, it would be foolish to think that all will be okay this summer,’ he says in the correspondence.
   
‘Within a year or so, residential housing problems should largely be behind us. Prices will remain far below bubble levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means,’ he continues.
 
‘People thought it was good news a few years back when housing starts , the supply side of the picture, were running about 2 million annually. But household formations, the demand side, only amounted to about 1.2 million,’ he adds.