Prime London house prices tipped to rise 26%

Property prices in the capital's most prestigious postcodes are continuing their stratospheric rise.

Knight Frank, the upmarket agency, began this year by saying prices in London's smartest districts would not rise during 2013, largely because stamp duty on the purchase of homes over £2m was increased from 5% to 7%.

But the firm has just revised its forecast from zero to 6%, saying "in spite of record prices viewings are up 15% compared to 2012". Applicants and sales volumes are also up, Knight Frank says, confounding the idea that more stamp duty would deter buyers.

Continued price growth follows already massive gains for this top slice of the market, generally referred to as "Prime Central London" (PCL) and comprising the fashionable areas of Kensington, Knightsbridge, Belgravia, Regents Park and Chelsea. Prices here are 60% higher than in March 2009 when the global financial crisis was at its peak.

Now prices are tipped to rise even further fuelled by foreign buyers.

"PCL prices are expected to increase by a further 26% in sterling terms between 2013 and 2018 but at a much slower rate for international buyers," according to Knight Frank researcher Liam Bailey. He reckons for US dollar-denominated buyers, prices will rise a smaller 15% over the same period as the dollar strengthens against the pound. Since Asian buyers use US dollars for these types of transaction, they would experience a similar benefit.