Oil, gold and repossessed property - these are the safe havens being sought out by cash-rich investors as financial markets around the world try to shake off the turmoil of the past two weeks. Bargain hunters are wading into the property market - particularly at the bottom end, where prices and sentiment have been most afflicted - despite predictions from many observers that values have farther to fall and signs of recovery cannot be expected for at least a year. Their ability to move fast to snap up affordable homes on the open market is leaving nervous first-time buyers shut out as they struggle to secure home loans.

Liam Bailey, head of research at Knight Frank, believes that in this slowdown there are signs of an enduring belief among investors that, despite falling prices, a recovery must occur. Jeremy Leaf, an estate agent in North London and the Royal Institution of Chartered Surveyors' spokesman, says that the plunging values of shares and near-demise of HBOS and AIG will, over the medium term, help to bolster the appeal of property as a safe haven for investment.

Some buyers are showing signs that they expect the market to bottom out sooner than next year, at least in the case of properties being sold off by pressured sellers for much less than their peak value. Last week - in the dark days following the shock collapse of Lehman Brothers and only hours after LloydsTSB stepped in to bail out HBOS - the auction house Allsop presided over the first day of a bumper auction, at which 82 per cent of the UK homes offered sold. The second day, held on Monday, achieved a sales rate of 92 per cent. Gary Murphy, an auctioneer at Allsop, says: “The market is not dead. There is plenty of trade, but the key factor is price.”

More than half of the lots coming up for sale in auction rooms are repossessions or otherwise distressed sales, according to Murphy; this is helping to ensure the keen prices that attract savvy buyers, who can step in more confidently and quickly than owner-occupiers. Murphy says: “A two-tier market is developing, in which many auction properties are those on which it would be a challenge to secure a mortgage. Demand from owner-occupiers and first-time buyers is falling away in favour of investors who have access to cash.”

The average price of the properties snapped up at the Allsop sale was £125,850, compared with the national average of £174,514 reported by Nationwide in its second-quarter house-price survey. It is such homes that the Government was hoping to bring within the reach of first-time buyers with its temporary stamp-duty holiday for homes under £175,000.

Properties exempt from stamp duty vary considerably according to the local market but, as shown in our illustration, right, range from a semidetached home in Belfast to a studio apartment in West Kensington, London. But agents are already reporting that the stamp-duty exemption is too insignificant to help aspiring first-time buyers, who now make up only 8.3 per cent of the market, according to the National Association of Estate Agents. Michael Hack, of Solent Estates in Bournemouth, says: “In my particular area, the year-long cancellation of stamp duty up to £175,000 will not show a great deal of difference as the majority of property is far beyond this level.” In Inverness, Martin Long, of Bell Ingram, says that £175,000 will purchase a “city-centre apartment or a wee cottage”, yet the maximum stamp-duty saving of £1,750 is failing to stimulate interest when “many lenders will now be asking buyers for a fee of £2,000 on a mortgage.”

Confirmation of details of the exemption has brought a welcome end to speculation, which agents blamed for causing the collapse of hundreds of deals. And the failure of the Government's intervention to help first-time buyers has not detracted from a slight warming of mood in the market as reported by some agents. In St Albans, Hertfordshire, the agent Martin Treasure reports that sentiment “is starting to get lukewarm again”. The reason? Prices are now 20 per cent lower than their peak. “Eighteen months ago, a one-bedroom apartment a few minutes' walk from the station would have cost about £215,000, but they are now down to £170,000. There has been a 20 per cent improvement in affordability, and that's a staggering adjustment given the time involved.”

Ian Harris, the National Association of Estate Agents' spokesman in Norfolk, has noted a return of aspiring buyers who have been priced out for three or four years and says they are finding it easier to secure mortgages than anticipated, while Richard Hair, of Hair & Son, in Leigh-on-Sea, Essex, says: “We agreed as many sales last week as we had in all of August, and the office with the best sales figures is the one with the cheapest properties. It seems people who considered buying and selling in August are doing it this month instead. That is another little positive sign.”

Times recommends

• Fall in house sales hits builders, estate agents and mortgage brokers
• Why the property credit crunch favours cash buyers
• The blood-curdling history of Quarrelwood House