With London?s traditional spring rush in the property market starting earlier every year ? now in December ? Knight Frank?s latest research on prices in the capital has found an buoyant market, with price growth totalling nearly 9% in the first quarter.

Prices in central London are now over 30% higher than they were a year ago, and in some locations ? namely Knightsbridge and Belgravia ? closer to 40%. ?Even after 18 months of strong price appreciation, the pace of growth has if anything quickened over time,? says the report. ?In the six months to March 2007 monthly price growth averaged 2.7%, compared to only 1.6% in the same period to March 2006.?

Higher transaction costs mean people are now moving less, and this coupled with a deficit of family accommodation mean supply is even lower than previously it has been. The amount of available property fell by over 50% in twelve months, according to Knight Frank?s figures, while the number of prospective purchasers increased by 17%.

Price rises have also clearly been driven by international demand form Europeans, Russians, Indians and increasingly Middle Eastern buyers, all of whom are pushing up the limits at the top end of the market. ?In the first quarter of this year, property over £4m experienced growth of 11.4% whereas property in the sub £1m bracket experienced more restrained growth, with prices increasing by 6.2%,? the report says.

Whether this is a sustainable trend is a concern for many stakeholders in the London market, and Knight Frank do point out that a downturn in confidence nationally would impact on prices in the capital, even in the most expensive price brackets: ?We can not envisage a scenario where over an extended period prices were falling in the UK but rising steadily London. The strength of demand over supply means there is a central London buffer which protects the market, but if UK base rates were to hit 6.50% or above this would dissipate.?

However the April edition of the Treasury survey found a median expectation of Base Rates ending the year at 5.50, with the highest forecast put at 5.75, indicating that this worst case scenario is unlikely to be played out this year.