The cost of high end property in London fell by two per cent at the end of 2007, new figures have revealed.

As the fall-out of the US subprime mortgage crisis began to hit the UK and lenders imposed strict lending criteria on would-be homeowners, Savills said that the last three months of the year saw house prices at the top end of the market drop.

Lucian Cook, a director of research at Savills, told the Times: "The market has been influenced by City bonus expectations and the outlook for job security in the financial sector."

City workers spent around £5.5 billion in bonuses on property last year but Savills predict that this will fall to £2 billion this year as turbulence on world financial markets continues to be felt.

Experts also believe that it will continue to be tough to obtain a home loan, making it harder for some buyers to afford the luxury homes they may have considered last year.

Sarah Hewin, an economist at American Express Bank, told Bloomberg: "The credit crunch is having an impact on bank lending and it''s feeding through to corporate and homeowners'' ability to borrow.

"There is a risk the economy could come close to recession," she warned.