William Hill, head of property at Schroders predicted the recovery of the UK property market would begin in 2010 when he said equity investors would return to the market.

Speaking at Schroders’ media round table event, the Property Week columnist predicted property values would fall by 40-45% between the beginning and the end of the downturn – a steeper fall than in the early 1990s recession.

However, he said that the lack of oversupply and rental growth seen in the 1990s, combined with a return of international interest in the UK market, meant that prime property assets would begin to stabilise.

‘We will see a two-speed market,’ he said. ‘There are signs of emerging stability in the prime area of the market, but for the secondary market, the bloodbath will continue. It is a nasty problem that will take much longer to sort out.’

Hill criticised the ‘huge inconsistencies between valuers’ and warned that there was ‘mistrust over where valuations are because of the incredible discrepancies between funds’.

Mark Callender, head of property research at Schroders, forecast a 15% fall in rental growth from June 2007 to 2011 – lower that in the 1990s – with retail only falling by 5%, and offices by 25%.

However, the City office market, where there is oversupply would see a fall of 40% he predicted.

Callender forecast property returns of -17% this year, -10% next year and -6% in 2010. However, he said that property income return is likely to reach +7% even if voids increased.

Hill dismissed the impact of empty rates relief for properties with a rateable value of £15,000 as making ‘no real difference’ to property companies.

He also said that banks would ‘see sense’ and not be clamping down on companies in breach of their loan covenants as long as there was continued rental income.