When does bad news become good? On the face of it, the Spanish bank Santander’s knockdown bid for Alliance & Leicester, a stalwart of the UK’s mortgage market, showed what a swathe the credit crunch has carved through the housing sector. Yet the fact that somebody is prepared to take a punt on the market coming back at some stage could be viewed as positive.

The latest survey from the Royal Institution of Chartered Surveyors (Rics), which showed a net 88% of surveyors reporting falling house prices and the average number of sales per surveyor dropping to 15.3 over the latest three months, the lowest on record, also looked like unalloyed bad news. Rics, however, chose to emphasise that price numbers are less negative than they were, that buyer inquiries and agreed sales are falling less rapidly, and that predators are starting to circle in search of bargains.

Rics also found little evidence of forced selling by either home-owners or buy-to-let landlords. A report commissioned by the Association of Residential Letting Agents (Arla) suggests landlords who can stay in the market would be sensible to do so. The report, The Modern UK Housing Market - Origins and Prospects, by Professor Michael Ball of Reading University, notes the rise of the private rented sector from near extinction to a £500 billion asset class in recent years. There are more than 1m landlords.

Ball says that new investment in buy-to-let is indeed likely to fall as credit becomes more difficult to obtain – but, although borrowing costs are rising, a big sell-off is, he believes, “unlikely”, thanks to the strength of rental demand. Potential home-buyers, who were deterred by high house prices and lack of affordability, are now prevented from buying by tougher lending criteria.

What will be the result? “Given rising demand in a context of less supply, rents in many areas are likely to rise quite significantly in the short run, unless the UK economy plunges into a sharp recession,” Ball concludes. “Although it is difficult to predict short-term changes in housing rents, increases of 10%-15% in both 2008 and 2009 may well occur, outside a relatively limited number of areas with a significant glut of properties.”

Though the report was commissioned by Arla and the National Federation of Property Professionals, it argues that the private rented sector will stabilise, rather than drag down, the market. What’s good for landlords, of course, may not be such good news for tenants.

home.economics@sunday-times.co.uk

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