Prime London house prices grew 1.5% in January, according to the Knight Frank Prime Central London Residential Index. The latest figures show that annual growth rate has increased to 9.8%, the strongest annual growth since September 2002.

The Prime Central London Residential Index selects properties from the top end of the market in Central London (flats and penthouses with an average value of over £1.5m and houses with an average value of close to £3.0m), located in postcodes W1, SW1, SW3 NW1, SW10, W8 and W14. These properties are then revalued monthly to provide an accurate assessment of pricing trends in the prime central London sales market.

According to Knight Frank?s most recent index, supply shortages together with strengthening demand in the prime London markets accounts for January?s strong performance. Huge international interest and employment growth together with significantly higher market confidence are also key factors. ? Following on from an unprecedented run up to Christmas which saw Knight Frank?s London residential sales offices exchange contracts on a record number of properties, January has continued in the same vein. Reports from the mainstream market are buoyant with many of the potential purchasers who were ?waiting and seeing? before Christmas deciding that the time is now right to purchase,? Mr. Bailey explains.

Traditional areas such as Kensington and Chelsea are, according to Knight Frank, experiencing an increase in enquiries and transactions. The Docklands area is also highlighted as experiencing a high demand.

However a shortage of property continues to restrict both the prime sales and the lettings markets. Knight Frank notes that potential vendors are still reluctant to part with their properties