Hong Kong, Jakarta and Beijing were the only cities to outperform London in terms of the price growth of properties between the trough of the 2009 property market and the latter part of 2012, international real estate consultants Knight Frank said in a review of the UK’s market.

Despite headwinds from a 40 per cent jump in UK stamp duty taxes and new rules for an annual charge on properties worth £2 million or more, the London prime residential property market reported a price rise last year of 8.7 per cent from a year before, the firm said. Over the period from Q1 2009 to Q3 2012, prices rose almost 51 per cent, the report said. 

This gain was “well ahead of rival European cities which have struggled with ongoing economic pressures and the desire of international buyers to diversify away from euro-denominated assets”, it said. Among other cities, for example, New York saw prices fall by 1.4 per cent, while prices fell 4 per cent in Paris and 6 per cent in Geneva.

Between the first quarter of 2009 and the third quarter of last year, Hong Kong prices rose 72.72 per cent; Beijing prices rose 71.58 per cent; Jakarta prices rose 52.9 per cent, and London's rose by 50.87 per cent, Knight Frank said. 

London’s prime market contrasts with the performance of the UK in general. While prices for upscale properties in the capital are now 53 per cent higher than the market trough in March 2009, average UK house prices are only 7.5 per cent higher over the same period. Last year, average UK prices fell by 1.0 per cent.

Knight Frank predicts there will be no price growth in London prime residential property values in 2013, as the market absorbs the effects of higher taxes.

Foreign buyers have been significant in boosting the London market in recent years; foreigners now accounted for 49.3 per cent of sales on £1.0 million-plus homes in 2012. Of the overseas share, Russians accounted for 6.6 per cent, US citizens 4.8 per cent, Indian citizens, 4.4 per cent, French citizens 3.3 per cent and Italian nationals at 2.6 per cent. Other shares were: South Africa (2.2 per cent); Greece (1.8 per cent); United Arab Emirates (1.5 per cent); Australia (1.5 per cent); Germany (1.5 per cent); Switzerland (1.1 per cent); Oman (1.1 per cent); Turkey (1.1 per cent) and Saudi Arabia (1.1 per cent).