Credit losses

Abu Dhabi: The total writedowns and credit losses in the past year in the global real estate sector is set to reach $1 trillion, according to Stephen R. Blank, senior fellow at the US-based think tank Urban Land Institute (ULI).

"The losses estimated so far for US market alone is $500 billion, while for Europe it's $225 billion and Asia $25 billion," Blank said at a conference in Abu Dhabi.

He said since late 2006, over 312 US lenders have either filed for bankruptcy, temporarily suspended operations or been acquired by a third party.

Blank said 2009 would be a "terribly difficult year" for the US real estate market as "capitalization rates will increase and transaction volumes will decline.""There would possibly be signs of recovery in 2010. I anticipate the US real estate market to recover sometime in 2011," said Black.

"The (US) government will have to create an environment where there will be increased liquidity for the real estate market, where banks will lend to other financial institutions," he added.

Black said five paradigm shifts - securitization, consolidation, globalization, technology and resiliency - had been underway in the real estate capital market until progress was interrupted in mid-2007.

ULI, founded in 1936, is a nonprofit research and education organization supported by its members. The institute has more than 40,000 members worldwide, representing the entire spectrum of land use and real estate development disciplines.