Prime Central London house price growth is strongest for 27 years

Prime central London property prices grew by a staggering 28.6% during 2006, the highest rate of growth since June 1979, 27 years ago, according to the latest Knight Frank Prime Central London Residential Sales Index.

Monthly price growth in December was 2.6%, meaning 10 out of 12 months in 2006 saw growth above 2%.

Price growth has been underpinned by two elements: low supply and bonus fuelled demand.

Despite a slowdown in the number of viewings in December, over 21% of prospective purchasers have made offers on residential property throughout Knight Franks London Sales offices.

Knight Frank’s Head of Residential Research, Liam Bailey, comments: “The price growth in Prime Central London during 2006 was the highest since June 1979 when prices increased by an extraordinary 43.8%. Annual property price growth has now exceeded the levels experienced in the boom of the late 1980s although current economic environment is likely to prevent growth levels surpassing those experienced in the late 1970s.

“Bonus money expected in the new year has already started to impact the market. According to Knight Frank data, the proportion of prospective purchasers making an offer on property has increased by eight percentage points since November to over 20%. Much of this demand is due to people wanting to find a property before bonuses are distributed.

“Kensington, Chelsea and Belgravia have been the most popular areas with property prices experiencing an average growth of approximately 4% in the month of December. Our price band analysis shows that the majority of growth has been in the £4 million+ market as shortages of stock continue to drive prices upwards. We anticipate stock levels to improve in the new year as people return to the market.”