Best-ever month for home sales

London’s property market is showing persistent signs of recovery, according to three separate studies.

Prime house prices in central London have risen 1.3 per cent this month. Liam Bailey, head of residential research at Knight Frank, says the market in central London is now in "rude health", with the number of sales up 75 per cent compared with last year. "The strongest areas have been Chelsea, Kensington and Notting Hill - where prices have risen by eight or nine per cent since March," he says.

He attributes the recovery to the shortage of property, low interest rates and strong overseas demand, but average prices still remain 18 per cent below their March 2008 peak. Savills says prices in prime south-west London are particularly strong, up by 6.4 per cent in the second quarter of the year (April to June), and by 8.4 per cent in the third quarter.

Savills’ Lindsay Cuthill, says: "We have had the best September ever. That was a huge surprise."

The Association of Residential Letting Agents says the market is beginning to stabilise. About a third of landlords in the South-East now say that they have more eager tenants than properties.

But James Hyman, head of residential sales at Cluttons, continues to insist the upturn will not last. He believes prices will fall again by up to eight percent before a true recovery in 2010 or 2011.

"We have still got an underlying problem with unemployment and the City has not yet recovered, which will have a major impact," he says.