Transactions in prime central London fell by almost a third in the three months to the end of September.
Lonres, which provides data across the market, says there was a 32% fall compared with the second quarter.
Every single price bracket was affected, with sales in the lowest category – homes costing under £500,000 – collapsing by well over half.
William Carrington, of Lonres, said: “It could be a long winter.”
He said that pre-election jitters are largely responsible, with the threat of Mansion Tax if Labour gets in.
Calling for any such tax to be purely payable in London, he said: “This tax should be London-centric, principally because the greatest growth has arisen in London.
“The housing market recovery in the countryside is fragile and it will harm, irreparably, many families whose stewardship of the countryside will end because such a tax would be too onerous for them to continue.
“One solution offered is the abolition of Stamp Duty Land Tax in its entirety and replacing it with a sales tax.
“This offers the following solutions: you only pay when you sell (there are graded bands for price levels) and everyone pays.
“It really could be that simple.”
Carrington concluded: “The general consensus is that the market is continuing to contract and sales will decrease, with a general softening of prices until the election passes next May.”
In the new Lonres report, 52% of central London agents report a 52% rise in instructions but a 52% drop in applicants. Properties are taking longer to sell, according to 62.7% of agents, and 57.8% expect fewer transactions this year compared with last.
Agents also reported a big rise in the number of properties being withdrawn from the market during the third quarter of this year – 12.4% more than in the same period in 2013.
With some sellers reluctant to accept lower asking prices – or to recognise a changing market – 35.5% of all properties currently being marketed across central London have had price reductions.
According to agents, 60% of properties that sold in the third quarter went for below the asking price.
Lonres notes: “Although this figure is much lower than the 87% level reached at the beginning of 2009, it is beginning to creep upwards again.”