Annual house price growth in May slowed to 0.1% in prime central London – the lowest rate since October 2009

The forthcoming EU referendum is weighing heavily on the London luxury property market, prompting buyers and sellers to postpone decisions until after the 23 June vote, according to the estate agent Knight Frank.

Annual house price growth in May slowed to 0.1% in prime central London, which stretches from Notting Hill to Islington and the City – the lowest rate since October 2009.

Prices in Knightsbridge dropped by 7.5% in the year to May, while values in neighbouring South Kensington and Chelsea were down 4.6% and 3.5% respectively. Several areas were flat, but prices in Islington rose 7.4%. With buyers and sellers of expensive properties postponing decisions until the outcome of the vote is known, the ratio of active buyers per available property has more than halved to 4.8 from 10 over the past year.

Tom Bill, Knight Frank’s head of London residential research, said: “The market has become price sensitive due to higher levels of stamp duty, but an indication of the Brexit effect is that demand in May remained subdued even for properties where asking prices have fallen by 10% or more.

Demand was already more restrained as a result of the impact of two stamp duty increases in 18 months.”The number of transactions between January and mid-May was flat compared with 2015. However, there have been signs that underlying demand is strengthening as buyers lower asking prices, the firm said. Viewings increased by 31% between January and April from a year earlier, suggesting a degree of pent-up demand.

This article was amended on 1 June 2016 after Knight Frank corrected its figures. The figure for Knightsbridge was initially given as a rise of 7.5%, rather than a fall of 7.5%.