The number of 'distressed' sellers in the capital is on the rise for the first time, according to property company PPR Estates.
It noted a rising number of inquiries from property owners in London looking for a quick sale below the current market price. It blamed rising unemployment and a collapse in buyer interest – particularly in areas hit by the recent riots – for the change.
The director of PPR Estates, Nick Hopkinson said that in the last few years there had been a rising number of "distressed" sellers in other parts of the country, but London had appeared to be immune as prices continued to rise.
In the past few months though, the company reported a jump in the number of inquiries from residential as well as commercial property owners in London who needed quick access to the equity in their property.
"Two very different property markets have emerged in London and across the rest of the UK in the last year," Mr Hopkinson said. "London has been the one area of the UK to buck the downward house price trend. Prime London prices, limited supply and cash-rich international buyers have masked the real state of the housing market by propping up the national statistics.
"And our company has had relatively few distressed inquiries from London sellers as a result of the unique dynamics in the capital."
He highlighted that this sentiment had changed over the past few months, and was particularly noticeable in areas hit by the recent riots – such as Lewisham, Croydon, Walthamstow and Tottenham.
"We are also aware of international buyers pulling back from investment purchases as a result of a loss of confidence in the 'safe haven' investing benefits of London" he said. "As we move into autumn I fear this may prove to be the catalyst that bursts the unsustainable property bubble that built up over the last few years."
House prices in the capital increased by 1.3 percent over the year according to Land Registry figures from July. Those same figures showed every other region in England and Wales experience a fall in house prices.
In the North East the decline was 8.8 percent, in Yorkshire and Humber it was 4.5 percent and in Wales 3.4 percent. In the South East and South West price falls were not as dramatic, but property prices fell by 1.1 percent and 1.9 percent respectively over this period.
PPR Estates said that in the regions negative equity was still a growing problem for many home owners. A year ago it was able to help more than 15 percent of the "distressed" sellers outside London who contacted the company. Now it was able to help less than 10 percent because they market price of their property was less than the value of their mortgage.