London house prices are no higher in real terms than they were a year ago, new figures show.

An average drop in sale prices this month of £900 across the capital means properties are fetching 2.4 per cent more than last year - around the rate of inflation.

The figures for prices actually achieved show the biggest loser was Hammersmith and Fulham, where the average fall was more than £7,000.

In Merton, the average price fell by £3,200, in Brent by £2,700 and in Croydon by £2,600. Prices rose in only two boroughs - Camden and Hounslow - and by less than £500.

The survey was by price monitoring firm Hometrack. Richard Donnell, its director of research, said: "The growth in demand over the last two months is only a third of the level seen in previous years, so the spring market is likely to be a non-event this year.

"Continued uncertainty in the financial markets, affordability pressures and weak buyer confidence are all there. As the majority of households simply do not need to move, we continue to forecast a 17 per cent drop in the number of sales this year.

"The number of London homes on the market rose by 8.4 per cent this month, while demand only grew by two per cent."

Chartered surveyor Anna Jolly, 29, put her three-bedroom flat in Battersea Square on the market for £400,000. A few weeks later she received an offer at £25,000 below the asking price.

She said: "I remember it clearly because it was the day that Northern Rock crashed. At the time I thought I could do better so I hung on for a few more weeks. We had a lot of viewings but no more offers, so I eventually accepted the original offer.

"I realised the way the market was going and realised it wasn't bad under the circumstances."

In Sneath Avenue, Golders Green, the owner of one four-bedroom house has had to cut her asking price by a fifth in less than three months.

She put the Thirties property on the market for £750,000. A month later she reduced it to £729,000 and three weeks later to £699,000.

Today, estate agency Moreland cut another £100,000 off. Edward Gilbert of Moreland said: "It's gone from being ridiculously overpriced to being very, very competitive. We expect to sell it within days."

Ed Stansfield, property analyst at the Capital Economics consultancy, said: "Hopes that the housing market is experiencing little more than a short-term wobble look increasingly forlorn.

"There is also a risk that some of the falls we have pencilled in for next year will be brought forward, with the result being a sharper correction than we are currently forecasting."

Howard Archer of analysts Global Insight added: "There are fewer mortgages available and they are more expensive. First-time buyers are particularly hard hit as mortgage lenders reduce the amount they are prepared to lend and demand larger deposits.

"We expect house prices to fall by at least five per cent both this year and in 2009. If the economy suffers extended weak growth, this will trigger a sharper fall in prices.

"If both sellers and buyers start expecting prices to fall sharply, there could be a flood of sellers putting their houses on to the market."

Borough-by-borough breakdown of house prices

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