A study commissioned by The Daily Telegraph shows that houses have become significantly less overvalued in recent months.
But the study warns against expectations of a swift rise in prices as fast as they did in the past.
While estate agents and spectators have been predicting house prices to fall by as much as 30% to 40% over the next few years, this news will be reassuring to those who have invested in the property market. Lombard Street Research, who conducted the study, said prices were unlikely to fall much more than 20% and should stop falling by mid to late 2009.
'We think that house prices could bottom out mid to late next year,' they believe. 'However, it's going to be a prolonged adjustment – even after prices hit the trough they won't recover swiftly or decisively, they will languish at the bottom. It all hinges on how the Government will use its quiet control of the banks.'
The index suggests that affordability today is very different to levels in th early 1990s. Since reaching a 16-year low affordability level of just under 83 points last year, at the peak of the housing boom, it has improved by around 10pc.
Read the full Telegraph story here
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