Prices on high-end homes in Chelsea fell by nearly nine per cent last month as stamp duty and the Brexit vote weighed on the market.
According to research by estate agents Knight Frank, house prices in Chelsea dropped by 8.9 per cent year-on-year in August.
Overall, prices for prime central London homes fell by 1.8 per cent as the Brexit vote pushed people to cut asking prices - the steepest drop since October 2009.
"Brexit has been the trigger for some vendors to reduce asking prices to levels that take higher rates of stamp duty and the new economic and political climate into consideration," said Tom Bill, head of London residential research at Knight Frank.
"Buyers denominated in overseas currencies are benefiting from an effective discount of more than 10 per cent since the start of the year due to the depreciation of sterling."
Knight Frank has a positive outlook, arguing that "there are grounds for cautious optimism that activity will intensify over the next few months".
Despite the summer lull, leading indicators of activity remain strong.
In the two months following the Brexit vote, the number of new buyers increased by 22.1 per cent compared to the same month last year, and the number of homes under offer increased 19 per cent.