Prime central London property prices rose by 0.2 per cent in December 2012, bringing annual price growth over the preceding 12 months to 8.7 per cent, but new UK taxes have hampered performance at the most expensive end of the market, according to Knight Frank, the global property firm.

Districts such as Hyde Park, Knightsbridge and Islington led the price growth over the month, recording rises of 0.8 per cent, 0.8 per cent and 0.7 per cent respectively.

By contrast, Notting Hill saw prime property values decline for the fourth straight month (-0.4 per cent), the firm reported in a regular snapshot of the state of London’s market.

Property prices in such areas have risen, fuelled to a considerable extent, industry-watchers say, by an influx of overseas money to the UK from investors in the Middle East, Asia and former Soviet Union. Such “real assets” also benefit from a perception of being able to hold value at a time of economic uncertainty and fears about inflation.

Among other details, the report noted that, for the first time since October 2010, Mayfair reported a fall in prices, of 0.3 per cent.

Tax impact

Knight Frank said that higher UK stamp duty rates for £2 million-plus property introduced in March this year have contributed to price growth in the £2 million ($3.3 million) to £5 million band underperforming the market average, while price growth in the sub-£2 millon band has flourished.

“The lower end of the market continues to provide the best news, with property values for homes worth up to £1 million growing by 0.8 per cent on a monthly basis in December and up 11.9 per cent year-on-year,” the report said.

“The publication of the draft Finance Bill 2013 has provided the market with some clarity on the tax changes first proposed in March 2012,” the report added.