Property prices up 3.37pc

Its Q1 2014 data, which is calculated on a rolling annual average basis, showed that prices have reached £251,041, rising by 1.4% over the last quarter.

Prime Central London has continued to inflate, increasing by 10.48% annually to average £1,552,400.

Naomi Heaton, chief executive of London Central Portfolio, said: “This data would not suggest a bubble and, indeed, annual growth rates have been much higher in the past when no such fears were ever raised, namely 16.1% in 2002, 14.8% in 2004 and 11.6% in 2011.

“The national housing market tends to correct itself when circumstances dictate and it is possible that the current furore about house prices is unhelpful during a fragile economic recovery.”

Domestic areas outside the Central zone are booming, as in some places the cost exceeds £1,000 per square foot.

Sales volumes increased by 29% annually to 6,237, the highest level since 2007 following two consecutive quarters of growth.

Compared to Q4 2013 sales in the sub £2m sector have shrunk by 28% however, while the number of transactions under £1m now represents less than 60% of the market.

Heaton added: “This reflects the fact that average prices are now well over £1m, so the lower end of the market is inevitably shrinking.

“It is also indicative of owners holding onto properties which are prime performers in the heartland of the private rented sector.

“It does not indicate a lack of appetite to buy at this level.”

Last week a one bedroom property in Paddington was sold at 10% above the asking price after six buyers competed with sealed bids, she reported.

Over the last 12 months the most expensive sale was £13.5m for a freehold terrace house in Westminster, London, while the cheapest was £6,900 for a detached house in North East Lincolnshire.