A leading agency says it’s seen a 33% drop in valuations last week alone – and it blames political and economic paralysis.

Simon Gerrard, chairman of London firm Martyn Gerrard Estate Agents, says: “Demand across London has softened by around 20%, as confidence continues to be eroded by prolonged political paralysis, international uncertainty in the Middle East, and upward pressure on interest rates.

“And it seems the new Prime Minister in waiting is following Labour’s footsteps of a Hansel and Gretel approach to policy, leaving a trail of broken breadcrumbs to test the waters first. 

“In a market where confidence is the single most important driver, even the suggestion of more interventionist measures risks further dampening sentiment and stalling growth.”

He says London may be about to suffer the most should there be a reaction against prospective Prime Minister Andy Burnham’s housing and economic policies.

“Living costs in parts of the North are significantly lower than in London, so any fiscal policy that suppresses house price growth will disproportionately affect the capital during an already acute cost-of-living crisis. 

“For many mortgaged homeowners, the focus is shifting to rising monthly payments and the risk of eroding equity, rather than aspirations to move up the ladder. 

“Without encouraging mobility in the housing market, broader economic activity inevitably slows.”

Gerrard says that while the infamous three Ds are keeping the market going – death, divorce and debt – even the recent pessimistic data about the housing market may be masking less welcome news.

He continues: “Transactions are taking longer to complete, meaning that official figures often reflect a snapshot of a market that has already shifted. 

“This lag is particularly evident in transaction data, as legal processes are increasingly stretched, delaying registrations far beyond previous cycles.”

Gerrard’s comments come as data from HM Revenue and Customs shows the number of UK residential transactions in May at 98,450 – that’s 2% lower than April.

Tom Bill, head of UK residential research at Knight Frank, comments on the HMRC figures: “The clearest signal from today’s data is the absence of a seasonal bounce in the housing market, with transactions falling 2% between April and May at precisely the time of year when they should be rising. 

he Middle East conflict and associated rise in mortgage rates has kept a lid on activity but domestic political uncertainty will further stifle demand. 

There will be questions over what taxes the new Chancellor will raise but also the credibility of wider ambitions to reform property tax, many of which are based on plans that are unachievable for a number of years. 

“Speculation looks set to be the enemy of the property market this summer.”