Andrew Smith, Primelocation.com’s Head of Insight, said: "Over the past couple of months prime agents have reported a modest upturn in activity (albeit from a very low base), a trend which can be attributed to the impact of falling prices, lower interest rates and a rise in demand from overseas buyers attracted by the dip in the value of Sterling.
"This explains the recent stabilisation in asking prices and provides tentative evidence that we are beginning to approach the bottom of the market. However, it’s important to bear in mind that we have a way to go yet, and buyers are still managing to negotiate substantial reductions on asking price.
"With the economic situation worsening and some pundits predicting that unemployment will hit three million in 2009, we expect the coming year to be a difficult one for the housing market.
"On the plus side, the weaker pound and falling prices will encourage greater interest from foreign buyers and cash-rich investors and this should lead to a modest improvement in transaction levels.
"But those buyers who do enter the market will be looking for bargains and vendors will remain under pressure to accept lower offers.
"We do not expect prices to begin to recover until well into the second half of 2009, but in the meantime there will be opportunities for those who are willing and able enter the market to make the most of the current situation."
In the Prime London lettings market the picture has not changed in the past nine months. In December, stock levels were 53% up on the same time last year, and this excess of supply continued to put pressure on rental values, which were down 1% month-on-month and by -4.9% year-on-year.
All the five Prime London regions recorded a fall in weekly rental values with Islington, City and Docklands, the market most directly affected by the recent turbulence in the City, registering the largest fall (-2.3% over the month).
Andrew Smith said: "Job losses in the City have hit the lettings market hard, as has the decline in demand from the corporate sector.
"This fall in demand has been exacerbated by a rise in supply as frustrated sellers look to the lettings market as a way to side-step stagnation and price falls on the sales side.
"The rise in the amount of available stock means that there is much more competition in the rentals market and landlords – accidental or professional – will need to price accordingly if they want to reduce the potential for periods void of any income.
"We would urge frustrated sellers to think carefully before they decide to rent and to check first with letting agents to see if their property is appropriate for the local market and meets tenants’ expectations.
"We would also advise them to they seek professional advice if they are unfamiliar with the many rules and regulations now governing the lettings market – energy performance certificates, tenant deposit protection, safety regulations, tax planning, and the like."
Have your say on this using the comment section below