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Prime central London property rises and gazumping returns

On an annual basis prices are now down 20.1% and down 22% since their peak in March 2008, according to the Knight Frank Prime Central London Index May 2009.

The recovery in prices has been led by the sub £1 million property sector, where prices have now risen 2.7% since March this year, the index shows. The £10 million plus sector has seen the slowest to see any recovery with prices only 0.8% higher over the same period

The strongest performing locations are Mayfair and Marylebone where prices have risen by 2.9% and 2.7% respectively.

'There has been a steadily improving picture in the central London market in recent months with buyers growing in number and deals beginning to shift upwards,' said Liam Bailey, head of residential research, Knight Frank.

'There is no question that purely in terms of sales activity the central London market is unrecognisable from where it was six months ago. The falls in capital values, cheap debt, overseas investors with US$ and Euros have encouraged buyers back into the market, with many just keen to get on with their lives having put all financial decisions on hold for the duration of 2009,' he added.

The majority of the sales are in the £1 million to £3 million price range. These include two bedroom flats to medium sized family houses with buyers seeking quality and the best locations, the index shows.

Even the top end of the market is beginning to get busier with Russians that have managed to retain their wealth buying in the best locations as they are keen to place their cash in the UK.

'Supply is still thin across the price ranges. This is particularly acute in the £1 to £2 million range causing great frustration for overseas investors who think they should be able to pick up bargains,' explained Bailey.

'The net result of this imbalance is that gazumping is back with the sealed bid system being used again for the first time in 18 months. All this has put a floor under prices, indeed for the best locations prices are up by almost 3% over the last two months,' he added.