'Investors are seeing a hefty rise in prices throughout central London as well as an increasing rent stream providing a double whammy of capital growth and a healthy income,' says Peter Braithwaite, managing director of DTZ Residential.

Average house prices in prime central London locations including Mayfair, Knightsbridge and Belgravia look set to jump by a further 10% over the next 12 months, according to Braithwaite while rents rose 6.5% in the year to March 2001.

The average price of a two bedroom apartment in Knightsbridge and South Kensington, SW7 is £500,000 ($695,000)--the highest in London. This compares with £475,000 ($660,000) in Mayfair, W1 or £460,000 ($640,000) in Covent Garden, WC2.

One of the prime movers in the rental market are corporate occupiers, mainly from North America and mainland Europe, although demand from private individuals has picked up significantly. 'In many instances, many aspiring purchasers and first time buyers are choosing to rent as they cannot raise sufficient capital to buy,' says Braithwaite.

Institutional investment has also seen a resurgence over the last three years with a number of funds targeting the residential sector. These include Baring Houston & Saunders and London Town, in partnership with ING. Further activity was seen from CIN, Aberdeen/Regent, Charterhouse and Schroders

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