Prime property prices increased by 3.1% in the month of March, the highest monthly rate of growth on record, leading to an annual price growth of 32%.

Property prices in the capital have been increasing for 27 consecutive months with the last price fall recorded in December 2004. Chelsea and St John’s Wood continue to be among the best performing areas in prime central London, according to Knight Frank.

The price of houses in prime central London has increased by 10.2% in the first three months of the year while flats increased by 7.5% in the same time period. Property prices continue to be driven by supply shortages and international demand.

In March, the supply of newly available property fell by 27% compared to the total for February while the number of prospective purchasers increased by 16%, fuelling the price rise in the market.

Knight Frank’s head of residential research, Liam Bailey said: “In general, houses have outperformed flats, mainly due to supply shortages. In the past month houses have increased in price by 3.9% while flats grew by 2.2%.”