The market for homes costing more than £1m has fallen © Bloomberg

Buyers from mainland Europe have largely withdrawn from the market in expensive London homes as they await the outcome of the UK’s June referendum on EU membership.

Just 9 per cent of people buying “prime” central London houses and apartments in the first quarter of this year came from other EU countries, compared with 29 per cent a year earlier and a five-year average of 20 per cent.

This is despite a 10 per cent fall in sterling against the euro that has made UK homes significantly cheaper for European buyers.

EU purchasers also bought fewer homes in other parts of London, according to data from Hamptons International, an estate agency.

French and Italians are usually the most enthusiastic buyers, agents said.

“The EU has always been the biggest source of international buyers in London, so seeing that falling off — particularly at this time — suggests a bit more caution,” said Fionnuala Earley, director of research at Hamptons International.

“Why make a decision now when the thing you might be nervous about will happen in a few weeks’ time? There are questions over what may happen to the currency and the economy.”

London residents and homeowners from elsewhere in Europe may also be concerned about their right to stay if the UK votes to leave the EU. Lawyers and community groups have reported a rush to apply for British citizenship before the vote.

Ms Earley said the prime central London market was especially affected, partly because it is more dependent on overseas buyers and partly because prices there are falling, creating an added incentive for buyers to wait. This includes areas such as Chelsea, Belgravia and Kensington, where there is a large French community.

London homes priced from £2m to £5m now cost 9.7 per cent less than at their 2014 peak, while those over £5m cost 8 per cent less, according to LonRes, a data provider.

However, some appear to view the currency drop as a buying opportunity.

Charles McDowell, an agent for prime central London homes, said he had agreed three deals in the past week with European buyers, one for an £18m home.

“They said that they are bringing money to the UK now as they think there is a high probability we will stay in the EU, and therefore sterling will strengthen against other currencies, making property more expensive,” Mr McDowell said.

The proportion of EU homeowners selling their prime central London properties has also dropped this year, suggesting a general mood of nervousness about making decisions ahead of the vote, Hamptons said.

That has also been shared by commercial property investors, who sharply decreased their investment in the sector in the first quarter.

Fitch, the rating agency, has predicted that a vote to leave the EU could bring down house prices across the country by as much as 25 per cent and the chancellor said on Friday they would fall by at least 10 per cent.

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