Sales commission at the estate agents Foxtons slid by more than a quarter at the end of last year in the latest sign that the capital’s runaway housing market is rapidly cooling.

Foxtons, which has 51 branches, mostly in London, and sends out agents in its fleet of liveried dark-green Mini Coopers, said it did not expect a recovery until after the general election in May.

It said turnover fell 12.1% in the final quarter of last year as the slump in sales commissions more than offset a recovery in lettings. Commission on sales was down 25.7% compared with the same months in 2013, when activity in the London market was at its highest level since 2008. Foxtons still made sales commissions of £70m over 2014, up 3.6% on 2013.

The agency warned of a fall in annual profits in October after a slowdown in the London market since August, but the speed of the decline surprised the City. Rival estate agent Countrywide said last week that a slowdown in the UK housing market was clearly evident in the final quarter of 2014, and expects “some sluggishness” in the first half of this year due to the election.

As well as uncertainty over the election outcome and the effect of Labour’s possible mansion tax on homes worth more than £2m, Foxtons blamed a general slowdown in the London property market after a period of rapid price growth and the introduction of tighter rules on mortgage lenders. The chain charges sales commission of 2.5% with its average sale price put at £545,000 last year.

Central London faces a glut of expensive new homes, with about 54,000 being built or planned, according to research from Property Vision, Lonres and Dataloft. Most of them will be priced around £1m but in the areas where the developments are sited just 3,900 homes worth more than £1m were sold last year, the study said.

Lettings, which account for half of Foxtons’ business, remained flat for much of last year but improved in the fourth quarter, notching up a 7.7% rise.

Foxtons shares fell immediately after the news but recovered to close 12% higher at 180p, with brokers suggesting the company was well placed to cash in on a recovery.

The agency, founded by Jon Hunt in Notting Hill in 1981, floated on the stock market in September 2013 and the shares quickly climbed to peak at 389p in February 2014. They have since fallen to stand nearly 25% down on their 230p float price. lost nearly a quarter of their value since their debut.

Foxtons is opening five to 10 new branches in London each year.

Numis analyst Chris Millington said: “While profits were marginally below our estimates and the short-term outlook is somewhat uncertain, we remain of the view that Foxtons’ long-term attractions remain and once the market recovers the group will make very high margins on incremental revenue.”