As annualised price growth stands at 26.6%, the highest in the capital since June 1988, Knight Frank says City bonuses are putting paid to the winter slowdown.

Its latest Central London index says that although bonuses have not yet been received, the market has already felt their impact. Liam Bailey, Head of Residential Research, said: ‘The impact of demand from the City has meant that the traditional end of year slowdown is becoming a thing of the past in London.

‘Last December saw the beginning of an upwards shift in demand which never really slowed through 2006. The uptick in demand coincided with the beginning of last year’s bonus season, with demand at a level even higher than we saw last year.’

Knight Frank also predicts that bonuses will amount to over £9bn this year smashing last year’s records, as over 90% of workers say they are expecting to be paid more than last year.

Looking ahead to 2007, Mr Bailey said he expects these trends to continue: ‘Our forecast for price growth in price central London is 12%, which compares to the 27% we will see in total during 2006.

‘Our forecast for price growth in the wider UK market during 2007 is 6% again, with London and the South of England leading the growth during the year.’