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Prime London property sees first price rise for over a year

Property prices rose by 0.4% in April, according to the latest Knight Frank Prime Central London Index. It means that prices have now fallen by 23.6% since their peak in March 2008.

It is the under #1 million section of the prime property market that is leading the first signs of recovery with a rise of 1.6% in April. The weakest sector was the top end of the market with properties worth #10 million or more seeing a 2.2% price fall.

However, Liam Bailey, head of residential research at Knight Frank, cautioned against reading too much into one month's figures. 'Nevertheless, house price growth of 0.4% in central London's exclusive postcodes reflects a growing trend towards stronger market conditions which have been developing since the turn of the year,' he said.

Knight Frank's research shows that since January viewing levels and applicant volumes have been steadily rising and in April were up by 45% and 32% year-on-year. Combined with a decline in the rate of price falls from the fourth quarter monthly average of around 3% to 1.5% and 1.6% in February and March respectively, it adds up to signs of optimism.

Bailey believes that the better performance at the lower end of the market reflects the fact that investors have been a significant driver of demand in recent months and that this end of the market was hit earlier and harder by price falls in 2008.

'Our view is that price falls are almost at an end for the central London market. However, we should not be surprised to see some negative monthly results through the year,' Bailey added.

'The most significant issue remains sales volumes which have risen over the past three months on a year-on-year basis by 28% but which are likely to be constrained by a lack of stock over the next three to six months,' he explained.

In Chelsea, one of the districts that are leading the recovery, Knight Frank's James Pace said that there has been a change of attitude in buyers who are losing the fear factor about prices falling considerably further. 'This has resulted in us agreeing more sales in the last six weeks than in the previous six months,' he said.

'The weakness of the pound has meant that buyers, most notably based in euros or dollars, have come to the market looking to take advantage of the favourable conditions that now exist. We are also seeing some buyers taking the opportunity to upgrade. As a result, sensibly priced property is receiving multiple bids and stock levels are reducing and we foresee this trend continuing into the early summer,' he added.

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