The best time to buy a house is when nobody else is.

This pithy maxim can be found in most residential property supplements bemoaning the bombed-out state of Britain’s housing market. But could it turn out to be good advice for private investors?

Certainly, hardly anyone is able to buy a house at the moment – or would want to. The UK’s Royal Institution of Chartered Surveyors (Rics) reports that property transactions were at their lowest level for 30 years in the three months to July, with estate agents averaging just over one sale a week.

However, James Thomas of Jones Lang LaSalle’s residential business says there is the expectation of good long-term performance in the UK residential market, thanks to growing population and net inward migration, insufficient housing output, and appetite for institutional residential investment.

But short-term performance concerns hamper immediate investment, he says. House prices have fallen more than 10 per cent in the past year, and think-tank Capital Economics forecasts a 41 per cent decline in real prices by the end of 2010.

Such bearish sentiment has hit the shares of housebuilders and other quoted companies with exposure to residential, such as Grainger Trust and student accommodation specialist Unite.

But, could this be the right time for private investors to invest in a buy-to-let house, or even buy shares with a residential flavour?

“In the long term, the outlook for residential investment is good; the obvious question is timing,” agrees Liam Bailey, of property consultant Knight Frank.

“At present, a lot of people have been forced into renting, as they can’t buy a house. Our research shows that within Greater London, tenant demand is up 30 per cent year-on-year.”

For those with cash to buy a house to let, this sounds like a no-brainer. Sadly, it’s not that simple: people who can’t sell their houses are offering them for rent.

“There are a lot of forced tenants, but also a lot of forced landlords,” Mr Bailey explains. “If anything, residential rents are slipping back. For greater London, we forecast a 5 per cent fall in 2008 against a 15 per cent rise in 2007.”

Rents may be falling, but not as fast as house prices. However, Jones Lang LaSalle emphasises the fundamental lack of housing in the UK and London, pointing to pent-up demand.

Neil Chegwidden, director of residential research, believes the window of opportunity for investors will open from June 2009 until December 2010 when house price growth will hit bottom and start to rise.

Government intervention in the housing market could herald a re-rating for both house prices and property share prices. A package of measures to help first-time buyers has been unveiled, involving a cut in stamp duty, although the industry wants further measures.

The Council of Mortgage Lenders (CML) has proposed the government should consider either underwriting or issuing government-backed residential securities to encourage a return to liquidity in the mortgage markets.

Mike Killoran, financial director of housebuilder Persimmon, agrees. “The quality of new mortgage business being written is pretty good, with lower loan-to-value rates and higher than average margins,” he says.

“If the government were to lead the way, and issue paper in return for assets, the banks could provide a little more of their balance sheets for the mortgage market.”

This is not the only government-backed solution that could help the property sector bounce back. Many hope for new rules on professional property investment.

Grainger Trust is one of the few big companies in this market with regulated residential tenancy portfolios across the UK and in Germany.

“It will get to a stage when rental yields will cover the increased cost of borrowing, but residential investment will become much more of an income play next time round,” predicts Andrew Pratt, managing director of residential investment.

“Capital growth has been the most important part of the model for private investors, but the focus will switch to rents.”

Grainger and fellow listed companies Quintain and Unite Group have all expressed interest in developing branded residential properties to rent – in industry speak, build-to-let.

This would diversify the risk of owning a single buy-to-let property, enabling investors to hold shares in a portfolio of professionally managed rented property across the country.

“Government housing targets won’t be met if the only way you can provide homes is through the housebuilders,” says Unite Group chief executive Mark Allan. “There is great potential for a developer backed by institutional capital, but the political will has to be there for it to happen.”

Claer Barrett is a companies writer for Investors Chronicle