London property prices are growing at their fastest rate since 1979, according to new figures from Knight Frank. The January Prime Central London Price Index showed 30.5% increases over the last 12 months, with prices rising by 3% in January alone. The average property in prime London Central now costs £716,778, compared with £202,739 for England & Wales, according to the London Central Portfolio.

Property experts attribute the raging demand to three factors: City bonus season, international demand and a continuing low supply. South West prime London postcodes such as Belgravia and Knightsbirdge have led the price growth: ‘This is the most international residential market in London,’ commented Liam Bailey, head of Knight Frank research. ‘The influx of overseas buyers – European, Russian, Indian and Middle Eastern – has seen this area lead the price growth. Prices rose 38.2% for houses and 36.0% for flats in this area in the year to the end of January.’

Belgravia and Knightsbridge now contain the highest priced property not only in London, but in the world, says Knight Frank, with £2,500 per sq ft sales prices regularly exceeded over the last 12 months. Demand for properties in South West prime London also increased strongly in January with applicant registrations 37% higher compared to the same month a year earlier. Meanwhile the number of properties on the market remained unchanged over the same period.

The latest figures have prompted speculation about further growth in 2007. ‘We are expecting prices to climb a further 12% in 2007 as demand continues to outstrip supply,’ explained Mr Bailey. ‘There is no doubt that the key to the price growth seen in south west London is international demand. We are seeing a noticeable polarisation in market performance even within central London between those markets influenced by international buyers and those which are not.’