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The prime central London property market remained buoyant in December, with the average price increasing by one per cent.

The findings mark a reversal of recent trends and follows two consecutive monthly falls in October and November.

According to estate agent Knight Frank, the December increase raises the quarterly growth to 1.4 per cent – just 0.2 per cent below the level recorded for the third quarter.

Furthermore, although the annual growth rate slowed over the final three months of 2007, to 28.6 per cent, this is only two per cent lower than January’s year-on-year rate.

The figure is also almost identical to the levels recorded in December 2006 (28.7 per cent) which at that stage was the highest since June 1979.

Knight Frank attributes the increase in prices to a deficit in supply, with demand still at high levels.

The Bank of England's decision to cut interest rates by 0.25 per cent in December also played a role in the price increase, as well as the influence of City bonuses in the prime central London market.

However, bonuses from financial workers in the City are expected to be between 25 and 50 per cent lower, when compared to 2006 – partially due to the impact of the credit crunch – and this has reduced the impact of this factor on the market.

The high quality of property in the market has also proved beneficial to property prices.

The long-term picture still looks uncertain, however.

"It would be unwise to suggest London’s prime market has weathered the credit crunch on the back of these figures," said Knight Frank in a statement.

"Indeed most indicators suggest that tightening economic conditions will continue and this may well result in job losses across the city. If this is the case it will inevitably lead to property purchase becoming a discretionary as opposed to investment making process."

Across central London - Knightsbridge, Mayfair, Belgravia and Chelsea – property prices returned to the growth levels last seen in September, some 1.8 per cent.