Knight Frank has reported that residential property prices surged more in 2006 than in the 26 years preceding. Prime central London property prices grew by a staggering 28.6% last year.

Knight Frank’s head of residential research, Liam Bailey, comments: “The price growth in Prime Central London during 2006 was the highest since June 1979 when prices increased by an extraordinary 43.8%. Annual property price growth has now exceeded the levels experienced in the boom of the late 1980s, although the current economic environment is likely to prevent growth levels surpassing those experienced in the late 1970s.”

According to Knight Frank data, the proportion of prospective purchasers making an offer on property has now increased by 8% since November 2006, to over 20%. Much of this demand is due to people wanting to find a property before city bonuses are distributed.

Kensington, Chelsea and Belgravia have been the most popular areas with property prices experiencing an average growth of approximately 4% in the month of December. The majority of growth has been in the £4m+ market, as shortages of stock continue to drive prices upwards.