House prices in prime central London remain robust, despite many forecasters predicting troubled times ahead for the capital, according to a new report from Knight Frank.

* Search for prime property for sale in London

Prices grew by 0.6% month-on-month, which is the average figure for the past six months, indicating a degree of stability to the market, and the three-month growth rate of 2.8% also strikes an optimistic note. However, annually the figures indicate a slowdown with the rate now at 23.8%, the lowest point since August 2007.

Hotspots for prices last month were Kensington and Chelsea and Mayfair, the report states.

Looking ahead next week’s Budget could also bring some new factors into play: ‘After a troubling few months the government’s decision to amend capital gains tax from its present rate of 40% down to 18% from April will help underscore these modest improvements in tough market conditions,’ said Liam Bailey, head of residential research at Knight Frank.

‘To those who have been seeking a way of capitalising their property assets for whatever reason this will come as very timely news. If the chancellor also uses his budget report on 12 March to increase the zero rate of stamp duty land tax from £125,000 as some have suggested, the outlook will be better still, but in the current financial climate this is by no means certain and especially at this end of the market. We’ll have to wait and see.’

So while would-be vendors and purchasers keep an eye on base rates, capital gains tax and stamp duty, Knight Frank continues to forecast a 3% growth rate for prime London by the end of the year, although, as Mr Bailey also points out: ‘With economic uncertainty dominating the minds of purchasers , the sector remains finely balanced.’

* Search for prime property for sale in London