Prime central London prices have fallen for the third consecutive month in anticipation of the general election in May.

Prime central London prices have fallen for the third consecutive month in anticipation of the general election.

As a question mark hovers over the proposed mansion tax ahead of May's election, buyers and sellers are putting off making moves just yet. Property prices for prime central London dipped -0.1 per cent in January while annual growth was at the lowest rate in five years, at just 4.6 per cent.

“In addition to internal divisions within the Labour Party over the feasibility of the [mansion] tax, further uncertainty surrounds its possible implementation because the likely outcome of the election will be coalition government,” said Knight Frank's head of London residential research, Tom Bill.

Debates around the mansion tax, which as it stands applies to properties worth more than £2 million (around $3.04 million), did little to affect sales in the £1 million to £2 million price band. Annual growth there was 7.6 per cent while sales grew by over 9 per cent in Hyde Park Estate, Islington and the City & Fringe.

Rental values, however, saw the upside of the tense political environment, with a 0.2 per cent climb last month while annual rental growth rose to a three-year high of 3.4 per cent. The shift from sales to rentals was further highlighted by the jump in rental yields to 2.94 per cent, the highest level in 17 months.

Bill added that it was also strong corporate demand fuelling the lettings market.

“Budgets are not as high as before the financial crisis but the spending power of many senior executives, in the form of share options, has improved as the stock market recovers,” he said.