House prices in London dropped at their fastest pace in more than two years in October sparking fears that a serious housing slowdown will spread from the nation's capital in the year ahead.

The Land Registry, the most comprehensive source of house price data, said today that house prices fell by 0.6 per cent in October in London.

While price rises in most other regions of England and Wales helped the overall average increase by an anaemic 0.1 per cent, the sharp drop in London set warning bells ringing as the capital's property market usually plots a course for the rest of the country.

October's decline was the first monthly fall since April 2006 and the sharpest such drop since August 2005, the Land Registry figures revealed.

Prices were up by 8.1 per cent over the year, the Land Registry said, the slowest rate of property inflation since last December.

While the authority's data are more comprehensive than other surveys, they are also less timely as they refer to the price of properties at the point of completion.

Analysts' attention will now be focused on tomorrow's survey from Nationwide detailing prices at the point of exchange in November.

The report is expected to point to a sharp decline in the annual rate of house price inflation, to 8.5 per cent in November from 9.7 per cent the month before on its figures.

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