Further price falls are expected but changing market conditions mean that the rate of fall may not be as great as it has been, according Yolande Barnes, head of residential research at the property adviser Savills.
'We could now be about to enter the latter stages of house price falls and be on the brink of the first stage in the recovery process. This is characterised by low supply as well as low demand levels which causes prices to bottom out,' she said.
'We have already seen a pronounced recovery in affordability, thanks to both price falls and reduced interest rates, which sets the platform for a recovery when macro-economic conditions are right,' she added.
However the return to house price growth will be a faltering process and further bad news on the economy particularly that which increases fear of unemployment, is likely to delay the point at which static prices turn to price growth, she warns.
Also there will be many stages and regional variations in the future trajectory of house prices that will test the nerves of both home owners and investors but the opportunities for those wanting income returns and the prospect of long-term growth are clearly in place now, Savills is convinced.
This is because there is anecdotal market evidence that suggests that the interest from cash buyers is already much higher and that good quality stock is being taken up, leaving a shortage of supply in some cases”.
'It is prime stock that is likely to first see an upturn and that will characterise the second stage of recovery. The third stage of more widespread recovery in the mainstream markets will be most dependant upon the depth and length of the recession,' she said.
It is becoming increasingly likely that the worsening economic climate will have the effect of pushing out the timing of recovery from Savill's earlier projections, perhaps by 12 months, she added.
Research from Savills shows that key market indices are currently showing between -15% to -20% falls from peak, but these mainstream indicators traditionally lag the 'forced sale' market, and discounts for distressed or forced sales are already running at -25% to -30% from their 2007 peak.
'Whilst Savills research cannot rule out the possibility of further price falls, they believe that the market will settle at around -25% from peak in the mainstream regional markets, and -30% in prime central London,' Barnes concluded.
