The average price of a home in central London hit a new high of £1,818,262 in 2016, thanks largely to a rally in the final quarter of the year that saw prices increase 14% over the previous quarter, fresh data from the Land Registry shows.

Overall, prices increased 3.75% over the previous year, owed in part to a shortage of housing supply on the market, as reflected by a sharp decline in sales.

Just 3,330 transactions took place over the year, the lowest number on record. This represented a fall of 29% over the previous year.

But Q4 showed some recovery in activity with an additional 118 sales, up 19% compared with the previous quarter, although was still down 33% on Q4 2015.

PCL was the only area analysed to reflect any increase in sales in Q4.

Naomi Heaton, CEO of London Central Portfolio, which analysed the statistics, said: “Having taken a big knock following last April’s new Additional Rate Stamp Duty and the shock of Brexit, evidence of a recovery in prime central London [PCL] in Q4 is positive news.

“As an international buying market, the weakness in sterling, combined with the Trump-effect and increasing instability in Europe, appears to have drawn investors back to PCL as a safe haven asset class.

“The uptick has been led, in particular, by Kensington and Chelsea which saw a 24% quarterly increase in prices.” 

In Greater London, the fall in transactions was even more marked, down 29% in Q4 over the corresponding period in 2015.

Whilst annual price growth was more positive, up 5.7%, average prices took a hit across the year, finishing 3% lower than in January.

Heaton added: “Despite government initiatives to support buyers with reductions in basic rate stamp duty and their flagship Help to Buy scheme, it appears the domestic market is still struggling.

“Salary caps on mortgage lending, which do not reflect the ratio between house prices and earnings, are hampering buyers to get on the housing ladder and their ability to trade up. This has been exacerbated by the failure to meet affordable housing targets, a trend which shows little sign of reversing.”