The prime London property market continues to go from strength to strength, despite the cost of living crisis, according to Knight Frank.

The estate agency reports that demand in the capital has recovered from the depths of the pandemic as the ‘escape to the country’ trend calms down.

The number of new prospective buyers registering in London last month was the third highest figure in a decade. Meanwhile, supply is finally picking up as the economic warnings mount, mortgage rates climb and owners sense prices may be peaking. Underlining this, the number of new sales instructions in May was the sixth highest figure in ten years.

With demand and supply both high, the inevitable result is more transactions. Indeed, the number of offers accepted in May was the highest monthly figure in a decade. The pattern is broadly similar in prime central and outer London, with both areas recording a ten-year high for offers accepted.

Although there will be a lag before sales numbers also rise, May was the tenth highest month in a decade for exchanges when the impact of stamp duty holidays is removed.

“The stars are aligning for buyers and sellers in the London property market, with supply increasingly able to keep pace with robust demand,” said Tom Bill, head of UK residential research at Knight Frank. “For those wondering when this period of strong activity will end, it’s likely to last longer inside zone 1 due to the recession-proof qualities of prime central London and the fact a longer-term recovery is underway.”

“It’s a perfect storm,” said Andrew Groocock, head of sales for Knight Frank’s City, East and North region in London. “Our London sales pipeline is the biggest it has ever been and even exceeds the most frenetic periods of the stamp duty holiday.”

Knight Frank forecast that property prices in prime central London (PCL) will outperform most other UK markets over the next five years.

PCL is in recovery mode after seven subdued years caused by tax rises and political uncertainty. International buyers, who haven’t yet retuned in meaningful numbers, will only accelerate this trend.

Meanwhile, quarterly growth in prime outer London (POL) declined for the third consecutive month in May as the race for space becomes marginally less frenetic and rising mortgage rates and the higher cost-of-living take their toll.

Prices in PCL rose 2.4% in the year to May, which was the highest rate of annual growth since April 2015. In prime outer London, prices increased 4.8% over the 12-month period, which was also the highest rate of annual growth in more than seven years.

Underlining the scope for recovery, prices in PCL are still 15.3% below their last peak in August 2015, while prices in POL remain 7.8% below their last high in July 2016.