Property sellers in London have reduced their expectations for the amount of money they will receive, boosting sale volumes at the end of last year, Savills said.
Average house prices across all prime London fell by 2.2 per cent in the final three months of 2016, according to Savills.
This left values down 4.9 per cent year on year and down 5.8 per cent since the stamp duty increases of December 2014 and announcement of a 3 per cent surcharge on additional homes.
Central London sales of properties worth more than £1m were 21 per cent down year on year in 2016 and in the three months to the end of July transaction volumes were running at about half the same period in 2015.
But in the last quarter of the year they had recovered to within 16 per cent of 2015 full year numbers.
Lucian Cook, Savills UK head of residential research, said: “Committed sellers increasingly understand the need to factor in both the additional stamp duty and economic uncertainty to their price expectations in order to attract still very cautious buyers.
“We saw a real dearth of transactions over the late spring and summer months following the race to beat the new 3 per cent surcharge.
“But further price adjustments, coupled with the currency play for international buyers, appear to have triggered greater buyer commitment and prime London sales volumes picked up significantly in September, October and November before easing back in December.”
Savills’ market intelligence suggests that from January to the end of November there were around 320 sales worth more than £5m in London, with a total of more than £3.7bn spent in this part of the market.
In volume terms, sales were 17 per cent below those in this bracket in the same 11 month period of 2015.
Savills’s forecast for prime London sees no price growth over the next two years, with a recovery not coming until 2019.
Mr Cook said: “Recent market activity demonstrates the continued appeal of prime London property at the right price.
“But buyer sentiment remains fragile. Improved transaction levels are the result of adjusted pricing and should not be seen as a precursor to price rises in the foreseeable future.”