House prices rose by 2.4% in March, according to the Knight Frank Prime Central London Residential Index. The latest figures show that the annualised growth is the highest since March 2001 with South West central London areas leading the recovery.

Knight Frank?s Head of Residential Research, Liam Bailey comments: ?Quarterly and annualised growth rates of 6.1% and 13.5% respectively are the highest since early 2001 when the previous price boom came to an end. Higher prices are reflected by higher sales volumes and reflect the general buoyancy and confidence in the market.?

However Mr Bailey forsees that the growth rate will soon run its course; ?Our 7% forecast for price growth in 2006 in central London appears increasingly conservative however we do not expect the current very rapid rate of growth to continue after June this year,? he explained.

The latest data from the Office of the Deputy Prime Minister supports this opinion. Following the fairly strong rise last month, the ODPM reports that house prices fell 1.2% in February from January ? the biggest fall in the history of the ODPM?s monthly index. The figures lead property economists to conclude that house price inflation will end the year below, rather than above, current rates.

House prices in the regions also took a turn for the worse, according to the ODPM?s figures. Price falls of 2% month-on-month or more were recorded in London, the East and South East in February. Yorkshire and Humberside were the only regions to see house prices rise in February, and annual house price inflation went back into negative territory in the East for the fourth month in five.

But Knight Frank continues to paint a positive picture as far as London is concerned. ?South west prime areas of London continue to be the strongest performing in terms of price growth,? says Mr Bailey. ?Further analysis reveals that houses have been performing best in the south west, whereas flats in the north of London have outperformed other areas.?