City fringe areas such as Clerkenwell, Shoreditch and Wapping have proven particularly popular, where prices have jumped by 47 per cent since 2011, according to research conducted by CBRE.
In the City itself - normally associated with office blocks, not residential buildings - average prices have increased by 81 per cent, equating to 12.6 per cent every year.
Jennet Siebrits, head of residential research at CBRE, said the diversification of the City and its neighbouring areas "has led to an expanded workforce keen to live in close proximity to their place of work."
"The current City workforce of 360,000 is anticipated to increase to 410,000 by 2026 and the residential market is seeking to meet demand for local homes, with 740 new properties under construction," Siebrits said.
CBRE said the City of London Corporation is now encouraging residential development, as well as other uses for the centre of the capital, such as bars and restaurants. City fringe areas have been outperforming other parts of London.
"In additional to the rising popularity of the City as a residential location, homes in the previously unloved City fringe are also in high demand," CBRE said in a report. "The area's transformation was originally set in motion in the 1980s when a pioneer population of artists and other creatives established themselves in Shoreditch, Hoxton and Clerkenwell."
The housing market has slowed over the past year due to stamp duty tax changes and buyers becoming cautious about big-ticket purchases due to the Brexit vote - but developers are hoping for help from the government in the autumn.
"The current stand-off in the market might be due to an expectation of fiscal loosing in the Autumn Statement," said Michelle Ricci, co-founder of property analysts Propcision.
"Anything short of stamp duty changes would be disappointing to induce or entice domestic buying.
"In London, the higher rate of stamp duty is punitive because it is stumping domestic transactions."
Tim Jackson, managing director at developers SAS Investments, said: "I don't think the high rate of stamp duty affects anyone out of London.
"But the government might not want to look like they are giving a break to rich Londoners."