The recent surge in housebuilders' profits was this week predicted to come to an end as the London housing market is hit by a fall in consumer confidence.
Analysts said the risk of a London house price collapse had grown greatly after the terrorist attacks in the USA, which appear to have shattered buyer confidence in the capital.

The RICS also said this week that although house prices had risen in August, a fall was now more likely.

The Council of Mortgage Lenders added to the gloom by warning that the attacks would lead to a larger slowdown in the housing market than first predicted.

CML director-general Michael Coogan said lending, which stood at a record £16.7bn in August, would fall next year. He said: "If anything, the effect of the terrorist attacks on the economy and consumer confidence may even tend towards a greater slowdown than we previously forecast."

The London property market was slowing before the attacks, but estate agents are reporting a sharp drop in foot traffic and completed sales. City bonuses, which have a large influence on the London property market, are expected to be less this year than last.

Any weakening in house prices will hit housebuilders' margins because they will find it harder to recoup what they paid for land when prices were rocketing.

Most housebuilders have reported an increase in their margins and profit this year as average selling prices rose on the back of the buoyant housing market. Supply had been outstripping demand as a result of planning delays.

Analysts said the housebuilders with the best long-term landbanks would be better placed to see off a price slump in London.

These include Berkeley, Crest Nicholson and Countryside Properties.