Fears that City bonuses will be slashed have affected sales of Central London flats in the £1 million bracket.

The disclosure from Knight Frank, one of the capital’s biggest upmarket property agents, comes with a warning that any indication over the coming weeks that investment banks will cut bonuses would cause house price growth in Central London to flatten for the rest of the year.

Parts of Central and Northern England have witnessed falls over the past month on the back of successive rises in interest rates.

Until now, however, upmarket London homes have been insulated from any wobbles in the general market by the estimated £5 billion of City bonus money that has been flowing into the captial’s smartest addresses after a record period of corporate and financial deals in the past year.

Knight Frank’s riverside division, which caters typically for bankers and other professionals looking for a pad on or near the Thames, has reported demand grinding to a halt for homes costing less than £1 million.

Sarah Haslam, head of the division, said: “It has been like a ghost town in the under£1 million market so far in August. We were very busy in the core market under £1 million for the past two years and we are very busy in the £1 million and over market, but under that it is as if there is no one out there. Typically, they are single and young people. They are quite nervous and saying they will wait to see if anything happens to their bonus.”

Liam Bailey, head of residential research at Knight Frank, said that he could not foresee any crash in prime Central London prices because of the chronic shortage of supply. However, he said that prices could flatten rapidly if bonuses and banking jobs were cut.

September will be a crucial month for testing the health of London’s prime markets, from Kensington and Chelsea to Belgravia and St John’s Wood. Next month is the usual period for the market to pick up as bankers return from their summer breaks.

Third-quarter figures from a quartet of American investment banks are due out in a month, setting the tone for City bonuses.

Last autumn agents at Savills predicted that £5 billion of the £8 billion of bonus money would be ploughed into London property. So far they have been right. Boom years for the City in 2005 and 2006 have caused prime London properties to rise by an average of 50 per cent over the past two years.