Prime London property prices rose 0.7% in October 2011, taking annual growth to 12.5%.

According to our Prime Central London Index, prices have risen 38.2% since their post-credit-crunch low in March 2009 and are now at a record high - 5.2% higher than their previous peak in March 2008.

As I noted in our September results, the only impact from recent European and global financial and economic market turmoil has been to push more buyers into the central London market.

Our analysis of market activity in the three-month period to October, compared to the same period in 2011, confirms that sales being agreed are up by 12% over the past year.

Despite this strong showing from sales volumes, and on-going positive movements in pricing, there are some indicators pointing to more subdued conditions in the market.

On the demand side, new buyer volumes have slipped by 11% over the past year, and viewings are down by 8%. While this slowdown in demand is partly offset by lower stock volumes, which are down 14% over the same period after a 6% decline in new instructions, there does seem to be a noticeable trend towards a more cautious approach from buyers.

Our forecast for the prime central London market in 2012 is for positive price growth, but at a slower pace than we have seen over the past two years - we are expecting a rise of 5% across the whole of next year, compared with strong double-digit growth this year.

In our view it is the diversity of demand for prime London property that has been a significant strength of the market, and a key factor behind our relatively positive outlook. Looking ahead there is a strong likelihood that geo-political issues will continue to push overseas buyers into London, especially at the top end of the market.

The forthcoming Russian election in 2012 has already spurred increased activity from Russian buyers, and the ramifications of the Arab spring are still not fully played out - buyers from this region are still looking to invest in London.

We believe the medium-term outlook for central London pricing is positive, with our forecast showing cumulative growth of 24% in the five years to 2016, supported by a recovering global economy and expanding wealth portfolios from 2013 and beyond.

 Read the full report