Sales of top-end homes plunged by 40% as the Chancellor introduced a stamp duty hike on properties worth more than £2 million, new data reveals.
The number of houses sold for more than £2 million in March, the latest month for which the figures are available, dropped to 124 from 205 the previous year, the Land Registry said.
A 7% stamp duty rate was imposed on homes in this bracket towards the end of March causing estate agents to warn that some property chains will crumble as a result.
Elsewhere, the Land Registry said average house prices in May in England and Wales increased 0.5% month-on-month to £161,677.
The region in England and Wales which experienced the highest increase in its average property value over the last 12 months is London with a movement of 7.7%. The capital also experienced the greatest monthly rise - an increase of 2.6%.
Yorkshire & The Humber experienced the greatest annual price fall with a decrease of 3.9%. The North East saw the most significant monthly price fall - a drop of 1.9%.
The most up-to-date figures available show that during March 2012, the number of completed house sales in England and Wales increased by 25% to 58,609 compared with 46,742 in March 2011.
Estate agents warned that the Chancellor risked "killing the goose that lays the golden egg" when he unveiled the 7% rate on £2 million properties.
But George Osborne defended the move and said it is "fair when money is tight, and so many families could do with help, that those buying the most expensive homes contribute more".
London homes have been vital in keeping average prices up, with the capital often viewed as the most "healthy" and stable area at a time when the housing market generally remains weak and patchy.