The housing market could begin to see more normal conditions emerging in the second quarter of this year and maybe an improvement in prices during 2009. This is possible if the recent improvements in the commercial money markets filter through to the mortgage market, predicts property specialist Knight Frank.

The company say house price growth across the UK has been slowing since September, with prices in April around 4% below their Autumn peak. Prices fell 2% during the first quarter of 2008. But this could change.

"Our relatively positive outlook for the UK market in terms of pricing, is based on the fact that without sharply rising interest rates or unemployment, there is not yet a large number of forced sellers,” explains Liam Bailey, Head of Residential Research at Knight Frank.

But he warns: “The credit crunch has proved its ability to provide surprises in recent weeks and without a rapid return to more normal lending conditions, the outlook for sale volumes and prices could be decidedly bleak during the remainder of 2008 and into 2009, we could easily see a scenario where sales volumes would fall by more than 40%, and prices by 5% to 10% or more.”

According to Knight Frank, overall sales volumes are likely to be at least 30% lower in 2008 compared to their 10 year average.  So far this year sales volumes are almost 35% below the long term average in the first quarter.