It’s a material world, and she is a material girl. Last week, Madonna expanded her property empire – buying the house next door to her eight-bedroom family home in Marylebone – reportedly spending £6m to do so. It is the sixth property that the singer has bought in the choicest residential areas of the capital. She apparently beat off competition from Jennifer Saunders, the writer and comedian, and the photographer Mario Testino in a housing market that seems to know no bounds.

The same week, however, a little lower down the housing – and social – scale, there were a few tentative signs that the froth is coming off the top of the market, and that the champagne bubbles that have been fizzing since January, with soaring house prices, are starting to go flat.

The latest index from Rightmove, the property website, revealed that asking prices in more than half the boroughs in London fell in June, and that for the first time since December 2006, average property prices in the capital are no longer outperforming the rest of the country.

“The gap between house prices in London and the rest of the UK is getting narrower,” says Miles Shipside, Rightmove’s commercial director. “Seventeen out of 32 boroughs saw falls. We expect to see this drop continue over the next few months.” Research from Smartnewhomes.com, a marketing website that monitors asking prices for new properties, has also recorded falls in the capital. The average price of a new home in the capital is now £385,686, down 3% during the past year and 3.7% in May.

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“The market may well be close to its peak in London,” says Liam Bailey, head of residential research at the nationwide property agency Knight Frank. “A slight shift in demand and supply is beginning to emerge. It indicates a move away from a seller’s to a buyer’s market. Since March, however, there has been a noticeable slowdown, with the number of new applicants registering for properties down by 30% compared to recent months.”

Yet only last month, economists were saying that the boom in house prices in London, fuelled by foreign buyers and bankrolled by bumper City bonuses, was rippling down to neighbouring boroughs, pushing up middle-market prices and forcing out first-time buyers.

So, what is really going on? Are these latest statistics really the first evidence of the long-predicted slowdown? “Sort of,” says Simon Jobson, manager of Winkworth’s Chiswick office, in Hounslow, a borough that, according to the Rightmove data, has seen asking prices fall by 2.4%. “The market has toughened up a bit,” he explains. “Whereas earlier in the year we had 30 buyers chasing one property, we now have only five or six. There is a certain realignment taking place, especially in the mid-market, from £650,000 to £850,000.

“Buyers are no longer willing to pay silly money, so a neighbouring council estate, a railway line or a noisy road is making a difference again. Buyers are not losing confidence yet, just becoming fussier.”

To Peter Mackie, head of the London desk for Property Vision, a high-end buying agent, this is a welcome sign of sanity returning to the marketplace. “This year has seen an excellent market for secondary-quality property,” he says. “If you had a house that wasn’t quite up to the mark, people rushed to buy and paid top whack. Now buyers are focusing on quality, and that is the sign of a fragmented market.”

It is a switch from what has been a seller’s market – and, in the most expensive streets of prime central London, values have increased by 33.3% in the past year, according to Knight Frank – to, if not quite a buyer’s market, then one where sellers can no longer be quite so bullish.

Max Ziff, chief executive of Humberts, says that any small price drops being seen are a reflection of the increase in supply of low- to mid-priced properties on the market in May. “This was due to two factors,” he says. “A degree of anxiety regarding potential interest-rate rises, but more particularly, the anticipated introduction of home information packs.”

As the scales tip ever so slightly in favour of the well-informed buyer, even the economists and estate agents who have been sounding warnings lately admit that the capital will see double-digit price growth by the end of the year. Perhaps the changing mood just means that, for the first time this year, estate agents are being forced to work harder.

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