London house prices have dropped by 20 per cent already, according to one estate agent in the capital.

Kinleigh Folkard & Hayward predict the number of transactions on London’s housing market this year will be half the number recorded by the Land Registry in 2007.

According to the estate agent, the average selling price in London was 14 per cent less than the asking price.

Managing director Lee Watts said selling prices were in excess of 20 per cent less than peak prices in August 2007, adding: "Some institutions and commentators have announced falls of between nine and 12 per cent, but I would say based on London alone, these figures are wildly inaccurate."

Mr Watts predicts that property prices in the capital will fall by a further four or five per cent early next year.

The announcement comes as inflation hits a 16-year high putting pressure on the Bank of England to cut interest rates.

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