Chestertons has called the bottom of the London housing market.

However, while the firm says buyer interest is recovering, it warns of a dramatic drop in the number of new properties coming up for sale.

Chestertons said it has seen 35% more buyer applicants since the start of the year, with viewings up 12% on a year ago.

However, new listings since the start of this year are down 22% on the same period last year.

Chestertons says the imbalance between supply and demand has helped slow the rate that house prices in London have been falling – with isolated instances of gazumping.

Managing director Guy Gittins said: “Following two years of substantial price drops, the market is now bottoming out in London.

“Property values in the capital – particularly in prime locations – have now come down to a level that is proving increasingly attractive to potential buyers, driving a huge surge in the number of people registering with agents and buying property since January.

“At the same time, the number of new properties being put up for sale has plummeted.

“This dramatic imbalance between supply and demand is starting to fuel small price increases in areas like Hyde Park and Putney as competition ramps up – and we’re even seeing instances of buyers attempting to ‘gazump’ others by offering to pay over asking price.

“The signs of recovery are there, with the prime market leading the way.

“It’s not just local buyers who are coming to the market in their droves now, but investors too, who are seeing improved yields and good opportunities.

“With March 29 looming large in people’s minds, overseas buyers fear their window of opportunity is closing and are moving fast to invest in the London property market while prices are low and sterling is weak.”

Chestertons’ take on the London market having hit bottom may not be altogether reassuring for regional markets outside the capital.

The historical ‘ripple’ effect means that London is the first to suffer a slump and the first to recover. In the past, the London market has tended to be in recovery mode by the time the downturn reaches further-away locations.