Ian Shepherdson, from High Frequency Economics, told the conference in Paris that the crisis was a super-cyclical event not seen since the 1930s, and damage to the world's banking system will take years to work through. The earliest trend growth may resume is 2012 or 2013. "Working out that catastrophe is going to take years," he said. "It will be worse than many past crises because the banks are in such bad shape." Overall global bank losses since 2007 are around $1.1tr.

Shepherdson's remarks came in contrast to the general tone of the conference, where 68% of real estate specialists expressed the view in an electronic vote that investment should pick up this year. While some 44% predicted a W-shaped crisis - a further dip before sustainable improvement sets in - another 36% favoured a U shape - with a relatively smooth and quick recovery.

Shepherdson identified the main causes of the crisis as the US Federal Reserve's rates cuts to 1% at the beginning of the last decade. "This was a gigantic mistake, and it led to a credit boom in a truly insane fashion," he said. Most excess credit went into residential mortgages in Anglo-Saxon countries, specifically the US, and the bubble burst has produced home loan delinquency rates of about 30%. Recent figures show 5m American households own homes with values now at 75% or less than their mortgage debt--so that a further mass of foreclosures must still come. Turning to commercial real estate, he said, "America is now becoming the land of abandoned malls."

Unlet and vacant shopping centres are also now starting to appear in the UK. "It ain't over; it's getting worse because the banks are still shrinking their books," he said. "Expect things to continue to head downward for the next one or 1-1/2 years. It will take until mid-2011 to get back to some degree of normality after all the de-leveraging needed, and it could take longer still."

The huge rise in savings rates in western developed countries is also hindering economic growth since populations are not spending. Neither can China help; it is a development story and not an export story.

"This is about building a country from more or less nothing and it will continue for quite a while yet," Shepherdson said. One positive signs is the complete absence of inflationary risks. "There is none now and there isn't going to be any going forward… There is a lot of noise in the headlines but forget what you read, inflation will continue to fall." However, money supply is contracting in an ominous manner. "Central banks are underplaying things because deflation is a very real risk in developed economies," he said. Coupled with a continuing slowdown in Eurozone wage growth, it means low official interest rates for much longer than many expect. "I can't imagine we will see any rate increases this year and probably not next year either."

Conversely, rents have to fall further. Residential prices will also not pick up; a quicker pace of transactions now will not make up for the huge overhang of unsold and potentially forecloseable property, particularly in the US and UK. However, Shepherdson said that the crisis should mean that capital is better allocated in future than in the recent past. "Growth in the US over the next 15 years should be better than the last 15 because of better allocation of capital, productivity in IT and the better regulation of banks," he added. pie