"A large star burns, explodes into a supernova and collapses into a dense mass of increasing gravitational attraction the financial market presently resembles a black hole into which increasing quantities and categories of credit are disappearing."

So says Douglas Lowe, chairman of Aim-listed property group Caledonian Trust, in his annual economic dissertation to shareholders in the company's annual results statement.

Lowe says banks stoked up the crisis by securitising high-risk loans, using "effectively a financial philosopher's stone that transmutes low-grade credit into investment grade loans".

He notes: "The Hudson Institute now estimates write-offs in America will be $600bn-$800bn (£302bn-£402bn). It seems incredible that in 1998 it was considered a crisis when LTCM collapsed leaving total debts of just $3bn."

On the bombed-out property market, he begins: "When force is applied to a pure homogeneous quartz crystal, it, unlike an impure crystal, does not exhibit any change or foreshock' as the force is increased until, without warning, it shatters."

He goes on: "Bank investment has increased, more and more complex investment vehicles have been created, reasonable expectation of returns has diminished progressively and depended more and more on increasing capital values rather than rental growth, while financing costs rise, and latterly taxi drivers and student bar staff first asked advice on, and then gave advice on, such investments."

He concludes that UK investment property "appears over-priced as rental growth is likely to be limited, yields are likely to rise further and effective interest rates will continue to be high".

Residential property would fall in price in the short term, but in the long term prices would continue to rise.

"Neither current nor prospective economic conditions will detract from the opportunity of uncovering specific situations from which substantial value can be created by effecting planning change."

Caledonian now owns 15 rural development sites, most of them in Perthshire where new planning policy on the conversion of steadings is already being implemented.

It also holds "four significant city centre sites, two small sites in the Edinburgh area and 73 plots near Dunbar," in addition to its investment portfolio The group has reported a loss of £244,153 in the year to June 30, 2007, compared with a profit of £129,509 last year - though the second half showed a profit of £154,431. Interest costs jumped by £464,587 to £508,093 due to significantly higher borrowings and slightly higher interest rates.

The trust's current year results would "continue to reflect the early stage of the development cycle", as the first development site would not be completed this year, Lowe said.

His analysis concludes: "I expect growth to be curtailed but a recession narrowly avoided and damage to the UK economy to be limited."