The reluctance of homeowners to sell could mean that more people choose to improve their properties with a kitchen extension or conservatory rather than move up the housing market ladder.
According to Ed Mead, director of sales at independent London estate agent Douglas & Gordon, homeowners are reluctant to sell while property prices are falling.
Those struggling for space could therefore choose to improve rather than move, as this would have the added bonus of increasing the value of property once buoyancy has returned to the market.
However, Mr Mead believes balance between supply and demand could still be a long way off as homeowners are worried about what they perceive to be losing out.
"The problem is that no-one is looking to sell," he commented.
"Whenever there is a property recession, people always think: No, Ill wait. If I wait a couple of years Ill get a better price."
Nationwides latest index shows house prices fell by 1.8 per cent in February due to weak consumer confidence.