The year is finishing as it began. This week a rather ugly four-bedroom house in Mayfair with a very lovely garden went on the market for £15 million. The details of the sale by Wetherell, the Mayfair agent, highlight how the smartest postcodes have remained largely unaffected by the slowdown. The price includes planning approval to demolish the home and replace it - at a cost of more millions of pounds - with a 10,500 sq ft house, including a swimming pool, media room and staff quarters.

This time last year, most observers were tipping a slowdown in London property prices. But the unleashing of £5.5 billion of City bonuses fuelled an unprecedented frenzy - and the party carried on throughout 2007 as buyers bid fast and high to invest the cash in prestige homes.

The winners

The most furious activity was in the prime central postcodes. City warriors were determined to secure a stake in Kensington, Chelsea, Belgravia, Mayfair, Holland Park or Notting Hill but had to compete with wealthy overseas buyers. Asking prices in June were as much as 57 per cent higher year on year in Mayfair, according to Primelocation.com, and overseas buyers seemed to have come out on top. This year they accounted for 60 per cent of purchases of the £4million-plus homes that make up “super-prime” property, according to Knight Frank.

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This led to what Brian D'Arcy Clark, of Savills, describes as “the toothpaste effect”, of other buyers being squeezed out to outlying areas. Prices jumped in the family suburbs of Fulham, Wimbledon and Barnes in southwest London, and once-gritty areas such as Southwark, Camden and Islington were among the highest risers. This was the year in which such locations lost their second-choice designation.

The losers

Extraordinary headline figures for Greater London - for example, prices were growing at a rate of 15.7 per cent a year by the end of June, according to Nationwide - skewed house price data and masked the fact that some areas were languishing. High-spending buyers were pushed out but not as far as Harrow, where annual growth was at a relatively shabby 9.4 per cent, the Land Registry reported in November.

East London felt this particular chill worst. Speculative investors have in recent years flooded in on the promise of Olympics and regeneration projects. But this year experts questioned how much higher prices could go. The worst performers of the year were the boroughs of Bexley (up 8.4 per cent), Newham (9.5) and Barking (9.8). John Saville, of Spicerhaart, says: “We have seen some settlement of values in Stratford because the infrastructure is not yet in place.”

Price rises pushing 10 per cent in a year would be the envy of most property owners, but the troubles besetting most other regions did catch up with London. In August, Rightmove reported the first drop in asking prices in a year, by October the Land Registry was saying house prices were falling faster in London than in any other region.

Forecast for 2008

Brian D'Arcy Clark, of Savills, says that prices will hold firm for prime property such as the potential building site in Mayfair, where “the opportunity presents itself for the very rich to buy or create the home they want. Spectacular houses remain in short supply.” More modest family homes will also hold their value, but only if they are high quality or in good locations. Liam Bailey, of Knight Frank, says: “Vendors of the very best properties will be able to name their own price (almost), but for the rest of the market growth will be noticeably lower.” Lucian Cook, of Savills, advises: “We expect the best-located property to continue to perform best, with properties which are blighted or in a secondary location to find it much harder.”

So the outlook is gloomier for 2008, but Londoners seem best placed to weather any storms, with observers expecting the current slowdown to be a mere glitch. Knight Frank expects annual growth of 3 per cent across Greater London and Savills says that the market should recover to record growth of 5 per cent by the end of next year, after a turbulent first quarter. Hamptons thinks that prime Central and North London will grow 4 per cent and South London by 3per cent.

And best of all? Savills expects the capital to outperform most regions for at least the next few years, a prediction that should help to encourage a return to the market by buyers scared off by the hangover they have felt in the latter part of an extraordinary year.

Health check

If there was any property worth owning in 2007, it was a smart home in London. There seemed to be no limit to what buyers would pay, particularly for those in such prestige Central London locations as Belgravia, Mayfair and Chelsea. Take this 4,702 sq ft Georgian property on Earls Terrace, near Kensington High Street. Its charming façade (which hides a four-bedroom home adorned with modern luxuries), private access to Edwardes Square and staff accommodation attracted much interest. Bidding was fierce and it sold swiftly through Knight Frank for about £1 million more than the £6.95 million asking price.

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