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UK economist upbeat as others in europe predict more doom and gloom for property industry

Speaking at a conference in Paris, Roger Bootle, often referred to as 'Dr Death for his gloomy economic forecasts, said that low interest rates over the next two years would have a positive impact on the commercial property sector in particular.

He told delegates at the Urban Land Institute's annual European gathering that he is upbeat. 'I see an enormous amount of money waiting on the sidelines ready to be invested,' he said.

'The next two years will be pretty grim for the economy and the implications for the property industry will be falling rents and tenant defaults. However, the sector may see a rebound in activity and prices well before overall levels of economic activity have improved,' he added.

But despite Bootle's optimism, other financial experts were less positive over the expectation of cash-rich investors waiting to pounce on bargain property prices.

'The situation facing the real estate market is one of severely restricted capital flows on both the debt and the equity side,' said Fredrik Elwing, managing director of Credit Suisse.

Others pointed out that there is still much unravelling to do by banks before they can move forward and start lending again.

'Banks haven't got to the bottom yet of where the situation is in terms of their portfolios. There are some horrible nightmares to face, not least in terms of commercial mortgage-backed securities,' said Simon Hersom, regional managing director of Middle East and Asia-Pacific real estate finance at RBS Global Banking and Markets.

Once concern is that Europe's commercial property markets could slump for longer and more deeply than feared as Germany's biggest open-ended real estate funds exit the market, forced out by the global credit crunch.

'The worst is yet to come. There's too much uncertainty in the financial markets. Nobody is in any hurry to invest in open-ended property funds right now,' said Bjoern Drescher, head of consultancy Drescher & Cie, in Frankfurt.