For the first time since the 5-year boom bubble burst in 2004 there is substantial evidence that the year-long recession in sales volumes has ‘bottomed out’, said Rightmove today.

August is traditionally a quiet holiday month. The summer trend is for the number of unsold properties to increase and time on the market to lengthen. However, both indicators are holding firm, according to the property website.

Estate agents are reporting that August sales levels outstripped each of the two previous months, highly unusual for what is normally the quietest sales month of the year bar December. The August drop in interest rates, more realistic pricing expectations of sellers, plus growing speculation of pension-assisted buy-to-let funds entering the market during 2006 are all factors that could be persuading some to snap up property at what they see as a trough in the market.

Miles Shipside, commercial director of Rightmove.co.uk said: "There are now clear signs that some buyers see this as the time to re-enter the market. We could be at the bottom of this cycle of the property market, though continued realistic pricing is critical to keep the momentum going."

"While the drop in prices has been much more muted than in previous downturns, sales volumes at the beginning of the year were the lowest for 10 years. That short, sharp, shock has led to sellers and their estate agents being much more realistic on pricing. The reward appears to be buyers returning in increasing numbers."

The group said house prices dropped by 0.4% during the five weeks to September 10, contributing to a £3,200 drop in the average cost of a home in England and Wales during the past three months to £195,407.

Annual house price growth also slipped further during the five weeks to just 1.6%, down from 2.1% the previous month

Miles Shipside observed, "It has taken a tough spring and summer to knock some sense into the market. Early in the year some sellers and estate agents were optimistically pricing as if we were entering a normal spring market, rather than what turned out to be the worst one for a decade. It has taken the last three months of more realistic and affordable pricing for sales volumes to start to recover."

Regional data

Yorkshire & Humberside – up 0.9% this month Yorkshire & Humberside see a reverse in falling asking prices this month, with a rise of £1,262. The average price of a home now stands at £149,327. The rate of annual increase continues to head downwards with a drop to 1.4%.

South West – up 0.7% this month Following two months of consecutive falls, asking prices in the South West rose by £1,432.

The average asking price of a home now stands at £209,508. The annual rate of inflation falls this month from 0.4% to 0.2%.

East Midlands – up 0.5% this month The East Midlands sees average asking prices rise for the second consecutive month, adding an extra £868 to the price of a home. The average asking price of a home now stands at £160,069. Prices remain just 1.6% more than compared to this time last year.

Greater London – down 0.2% this month The Capital sees its second consecutive fall in asking prices, with prices falling a further £561 this month. The average price of a home in the Capital now stands at £279,891. The annual rate of inflation continues to recover increasing from 0.7% in August to 1.2% this month.

The East of London has seen a rise in asking prices this month, fuelled by the successful bid of the Olympics. Tower Hamlets led the way with an increase of 2.2% on the month, followed by Newham at 1.4% and Waltham Forest at 1%. However regions which are at the more expensive end of the market have seen a downturn with areas such as Kensington & Chelsea seeing a fall of 4.8%.

For the third month in a row, demand outstrips supply, showing signs of a tentative recovery in the market.

South East – down 0.2% this month The South East has seen a further fall in asking prices this month of £431, bringing the average price of a home to £236,721. The South East are continuing to adjust their prices and are now some £5,642 cheaper than their peak in July this year. The annual rate of inflation has fallen this month to 0.3%.

East Anglia – down 0.3% this month Asking prices fall for the fifth consecutive month, representing a fall of £5,529 since their peak in April this year. The annual rate of inflation hits negative figures this month at -0.5%.

North West – down 1.0% this month Asking prices reversed this month, a welcome fall for buyers who have seen two months of consecutive rises. The average asking price now stands at £166,510 and is some £1,673 cheaper than last month. The annual rate of inflation continues to fall from 7.9% to 7.8% in September.

North – down 1.3% this month The North has seen a reverse in asking prices this month with a substantial fall of 1.3% (£1,908). This brings the average asking price of a home in this region to £146,518. The annual rate of inflation falls this month from 3.9% to just 1.4%.

West Midlands – down 2.0% this month The West Midlands sees a considerable fall in asking prices of £3,562, bringing the average asking price of a home to £172,644. The annual rate of inflation has seen a drop from 3.2% to 1.6% this month.

Wales – down 2.9% this month The average asking price of a house in Wales dropped to £167,931. The annual rate of inflation is 5.6%.