Prime central London prices are 49 per cent up since March 2009, when the market bottomed out following the financial crisis, and already 14 per cent above their March 2008 peak.
The rental market has been less buoyant – rents are down two per cent since October last year, when they hit a ceiling – driven by international buyers, with 59 per cent of all prime lets taken by foreign tenants.
Across the world’s global cities, only Miami, currently riding a wave of South American cash, has seen a bigger property boom in the year to June 2012, the report claims.
As with the rental boom, the price boom has an important international component: 41 per cent of buyers hailed from outside the UK, with the big contributions from Russia, India, Italy and the US.
“Prices are not the only market metric to have surged,” said Liam Bailey at Knight Frank, “The nature of the market has shifted; in 2008 Knight Frank sold prime London properties to 36 nationalities while in 2011 the total hit 62.”
But this isn’t to say there are no challenges facing prime property in London. Chancellor George Osborne added 40 per cent to stamp duty in his 2012 budget, while the UK economy has seen only sluggish and half-hearted recovery from the slump.
As a result, Knight Frank think prices may have hit a peak, and the firm does not expect last year’s growth in sales prices to be repeated.