High-end property group Savills said 2008 prospects hinged on how soon financial markets shaken by the credit crunch recovered their stride.

Despite a 14 per cent rise in underlying profits to £85.5 million last year, the company said uncertainty over City bonuses had driven a two per cent fall in prices among prime central London properties in the final three months of 2007.

Savills is now expecting low property turnover and flat house price growth in 2008 following the financial turmoil, which has also hit prices in the commercial property sector.

Chairman Peter Smith said: "The outlook for our UK and US commercial businesses and our UK residential and mortgage broking businesses continues to depend on how quickly confidence returns to financial markets."

Although question marks still hang over US and UK markets, Savills said it benefited from a wider geographical spread as its Asian and European businesses proved more resilient.

Around 5,000 eligible staff at the group shared a bonus pot which increased 20 per cent to £152 million.

Incoming chief executive Jeremy Helsby said Savills’ strong financial position and cost controls left it "well placed" to take advantage of possible opportunities thrown up by the credit crunch through either acquisitions or lower commercial property prices.

But the economic uncertainty also means the pace of growth at its UK residential arm – which accounts for around 20 per cent of revenues – will slow this year.

The business opened new offices at sites including Chester, Bournemouth, Cheltenham and Stratford-upon-Avon in 2007, but the focus this year will be on improving productivity at existing outlets.

Turnover in the new homes market was "noticeably down" in the last quarter of 2007 as demand from buy-to-let landlords and other investors tailed off, Savills added.

It said 2008 would be "challenging" for the property sector but added that demand for office space in the regions remained stable, despite a subdued London market.

The company said: "Once the credit squeeze has begun to ease, we expect a gradual pick up in the volume of capital market transactions across the UK commercial property market, with investors continuing to focus on opportunities that offer the prospect of above average rental growth."

Barry Allen, head of Savills in Birmingham, said: "The Birmingham office has enjoyed a very good year with increased turnover and substantial growth in our headcount. In particular, the performance of our commercial, retail development, residential, and industrial agency teams has been especially strong.

"Our expansion has resulted in a relocation into a larger flagship space in the city centre, which provides us with the necessary platform to grow further. We have seen fantastic growth in the ten years we have been in Birmingham and are looking forward to celebrating our anniversary with our clients later in 2008."

Revenues were up 26 per cent to £650.5 million.

Profit before tax was ahead two per cent to £85.9 million.

There is a proposed final dividend of 12p per share, making 18p for the year, an increase of 12.5 per cent.