Despite increasing caution in the prime central London, agents operating in it do not believe the market will crash.

A survey by tax firm Crowe Clark Whitehill gauged opinions among leading developers, surveyors and agents across London.

It found that 78% believe the London ‘housing bubble’ will not burst, despite uncertainty over the introduction of a mansion tax following next year’s general election.

However, the present system of taxation also emerged as a key concern of those surveyed, with Stamp Duty Land Tax and Capital Gains Tax cited as the biggest barriers to property transactions by over half of the respondents.

According to respondents, 60% of those surveyed believe that foreign investment will continue to be the biggest contributor to London property values over the coming year.

Stacy Eden, head of property and construction at Crowe Clark Whitehill, said: “The mood of the sector remains positive in spite of many perceived threats to the market’s future stability.

“Whilst foreign investment continues to be a crucial ingredient of London’s success, it is essential that the conditions for this are protected against the adverse effects of a tax regime that can serve as a disincentive to greater investor interest.

“The looming prospect of a mansion tax under a future government could prove to be the moment where this remarkable phase of sustained growth draws to a close.

“Simplification must be the watchword of the government if the present system of taxation is to ensure that London remains a beacon of recovery for the rest of the country.”

* Separate research by the TUC has found that London house prices are ten times the average income.

TUC general secretary Frances O’Grady said: “There is now not a single borough in London in which housing is affordable for those on an average local salary.”

Meanwhile, Camden Council in London says that one-fifth of council houses sold under the right to buy scheme are now in the hands of private landlords charging “extortionate rents”.