One of Scotland's leading solicitor estate agents forecasts that the housing market will start to show the first signs of recovery when the Bank of England levels out interest rates.
Scott Brown, estate agency partner with Warners, believes that buyers will be encouraged to enter the market if interest rate levels are kept steady for a minimum of two or three months - as they will not be tempted to put off their purchase in order to see if the base rate drops further.
"Although the recent cuts in interest rates have been a good step in trying to re-invigorate the economy, there are many people who are waiting to see if they will fall further before they choose whether to buy property or not," said Brown.
Interest rate decisions made by the BoE's monetary committee are supposed to target inflation at 2%. However, although inflation is currently running at around 4.5%, the Bank expects it will ease rapidly next year due to the credit crunch and the country may even enter a period of deflation. If deflation - a persistent decline in prices, accompanied by a strengthening in the purchasing power of cash - takes hold then there is a danger that we enter a vicious spiral of falling prices.
It was with this in mind that the Bank of England aggressively cut interest rates by 1.5% in
November from 4.5% to 3%. It then cut rates again by another 1% to 2%
this month. Economists believe it will cut another 0.5% or possibly 0.75% in January 2009 to ward off the spectre of deflation.
Brown believes that those who have been waiting to buy property will soon make their moves.
"If we have a couple of months where the rates stay unchanged, I think it will stir people into taking action. They will see that the Bank of England doesn't plan to drop them any lower and will want to take advantage of the favourable rates before they start going back up."
Where's the bottom?
October statistics from the ESPC show that Edinburgh house prices fell 11.4% from a year before. Brown acknowledges that house prices could fall further from here but is optimistic about a turnaround.
"When we reach the bottom of the curve I think prices are likely to plateau for a while before things start improving - but it's still too early to tell how long that will take to happen."
Forecasts for the UK property market have varied from a fall of a few percentage points to 10% or 15% drops.
"We still have situation where there is little confidence in the market. The economic climate has meant that many people fear losing their jobs and are not looking to move, while potential first-time buyers cannot get the funds to buy a home of their own."
Credit crunched
So is there any ray of sunshine for homeowners looking to sell their property?
"When interest rates level out, I think there will be quite a few people looking to enter the market but this has to coincide with better mortgages becoming available," says Brown.
"Until the banks and lenders start to offer mortgages of more than 75% at reasonable rates, which will encourage first-time buyers and spark further transactions along the property chain, I do not think there will be much recovery in the market."