Hidden among the national figures for house prices, which are showing falls of around 12% over the past year, there are huge regional differences.

With volumes low the sale of a few expensive properties at knock-down prices can seriously distort the figures.

In the last housing slump of the early 90s anyone who didn’t have to sell just sat tight – and that appears to be what is happening now, particularly in the London market, which acts as a barometer for the rest of the country.

But buyers are quick to sense opportunities as they feel that the bottom end of the market may have bottomed out.

Average London house prices have decreased by 15% so far this year compared with Nationwide’s national figure of 12%. But buyers are on the lookout for bargains and the number of potential buyers registering with estate agents has risen by 7% – in just one week – while the number of first time buyers has gone up too.

London house price drops are now stabilising, decreasing by only 0.10% in September, taking the average price to £247,271, down from £247,524 in August. ‘Prices have fallen 15% since January 2008 and may now have reached the bottom of the market. September started to show the first encouraging signs of green shoots, with a surge of buyers registering in order to take advantage of the more affordable prices and more attractive mortgage deals that lenders were offering,Despite the collapse of Lehman Brothers and Bradford & Bingley, the level of registered buyers in London actually jumped 7% the following week. The lower end of the market has felt less of the knock-on effects brought about by the recent financial turmoil and, in some areas, asking prices were met or even exceeded.’

There is also evidence that the amount of new rentals coming on the market may have peaked and analysts believe that prime central London rents should plateau and possibly rise in 2009.

The report from Knight Frank says that rents fell by 1.8% during the third quarter of the year. This fall outpaces the decline seen in the second quarter, when rents dropped by 0.5%, but rents are now 1.7% higher than a year ago.

Rents are also falling in outer London with prime property also falling by 1.8% over the last quarter, the report found.

Capital values are falling more rapidly than rents, consequently yields in central London are continuing to rise, now standing at 4.2%, compared to 3.9% a year ago.

Not all of the capital has been equally affected. Rents for houses in the most exclusive central areas have remained static over the past six months, a result of both scarcity and the demand from very highly paid financial specialists drafted in from overseas to manage the crisis in the City.However, the main cause of the falls in most markets is the number of forced landlords who have opted to rent out their primary residence - either because they cannot sell at the price they deem appropriate, or are waiting for the market to turn.

As a consequence, the quality and quantity of rental stock has noticeably increased over the past few months, increasing the choice for tenants and driving down rents. They have been joined by a number of developers who are choosing to let out their unsold properties.

However the unprecedented level of supply partly obscures the fact that tenant demand is also at historically high levels. The rental market is offering an ideal place for potential buyers who are deterred by falling prices in the sales market or difficulties with obtaining mortgages. Owning a property purely for rental income rather than house growth will become far more viable.

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