Cluttons says that current house price indices are behind the market. The estate agent is predicting prices will drop 20 to 25% from their August 2007 peak by early 2009, with the market bottoming out from then onwards.
It forecasts that many home owners who have built up equity in their homes over the last ten years are gearing up to take advantage of house price falls.
The same goes for buyers who have been in temporary rental accommodation over the last year.
Richard Cotton, divisional head of residential agency at Cluttons, says: “While 2009 will undoubtedly be another turbulent year for London’s property market, I believe we are approaching a turning point in terms of price falls.
“There are lots of buyers watching the residential market very closely, and they are desperate not to miss the floor when it arrives.”
Cotton says that over the last month sellers are pricing their properties more realistically and buyers are increasingly searching for 25% reductions from peak prices.
He adds: “There are fantastic opportunities to be had and this will pave the way for the return of the investor in early 2009.
“This is particularly true of multiple buy-to-let landlords with equity in their portfolios, who want to take advantage of low prices and cheaper mortgages as a result of their strong equity position.”
For the lettings market, Cotton is predicting a drop in demand.
He says rents will drop in line with oversupply, but landlords will benefit from high yields as rental income relative to property prices continues to strengthen.