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Buyer confidence expected to return to north of UK property market first

But this could be good news in terms of recovery as sales should start to pick up as buyers in this region believe the bottom of the market has been reached.

'Market correction in the north may be close to completion. In particular, the new build sector, where prices have fallen fastest, could see purchasers beginning to return to the market over the next few months, leading to higher sales volumes next year,' says the Northern Residential Report from Knight Frank.

Development land has been particularly badly hit by the housing downturn, with land values falling by as much as half in some parts of the north. However, as prices began falling here earlier than in other regions, recovery may be quicker than elsewhere.

Interest in the land market is already increasing and investors will begin making their first moves early next year, the report predicts.

'As the slowdown hit many northern markets first, as much as a year before prices began falling in London, developers had put their activities on hold well before the effects of the credit crunch really became apparent,' said Jon Neale, head of development research at Knight Frank.

'As a result, land values have already begun to approach their lowest level in parts of the north, and this could attract interest from developers. Also, the almost-complete halt in new housing development suggests that, in certain locations, undersupply of good-quality units could soon be an issue,' he added.

Julian D'Arcy, head of residential development for Knight Frank in the north of England, added: 'This rapid fall in prices has a silver lining. There is still a demand for housing, especially for quality homes in good locations and for a more diverse mix of housing, particularly family houses.

'It is important to remember that this more realistically-priced housing market provides the clarity that buyers need to be able to commit with confidence. This is a time when it pays to be brave, especially since this current decline cannot, and will not, last forever,' he explained.

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