House prices in London are likely to take their first annual fall since the financial crisis next year after soaring nearly 20 per cent over the past 12 months, an economics consultancy said on Monday.

Prices in the capital will decrease by 2.6 per cent in 2015, compared with a likely fall of 0.8 per cent across Britain, the Centre for Economics and Business Research forecast.

There have already been signs of weaker demand in London with the number of new buyer enquiries falling and properties staying on the market for longer before they sell - possibly a reflection of the recent surge in prices, CEBR said.

The strengthening of the pound, which affects foreign buyers of British property, and expected increases in interest rates by the Bank of England were also likely to cool the market.

"The price falls forecast for next year will be modest and we shouldn't be too worried about this. We are not anticipating a crash," Scott Corfe, CEBR's head of macroeconomics, said. "The market is adjusting after getting ahead of itself at the start of 2014."

The BoE has said the housing market represents the biggest domestic risk to Britain's economic recovery, although policymakers said last week that price growth was slowing sooner than they had expected. – Reuters