Overseas buyers help boost sales of £5m homes by 40%

The rise reflects furious competition for the best homes in the capital's premier addresses between overseas buyers and the wealthiest UK househunters. The most prominent foreign-buyers are still the Russians but they are facing increasing competition from Indian purchasers. The research by Savills shows that more than half of the homes sold for £5million or above in central London last year were located in an area less than 7.5sqkm, comprising the heartland of Knightsbridge, Chelsea and Belgravia.

The biggest volume of homes above £5 million was sold in SW1 (Belgravia and Knightsbridge), which took 23 per cent of the market. The SW7 and SW3 postcodes of South Kensington and Chelsea accounted for 17 and 15 per cent respectively.

Lucian Cook, Savills' director of research, said: "This concentration ref lects the limited number of period houses which meet the exacting requirements of the super wealthy and the evolution of a newbuild luxury flat market specifically developed to meet demand from overseas buyers in key London locations."

While traditional houses led the market for multi-million-pound sales, flats attracting huge prices include properties in The Knightsbridge - London's first high-end apartment development - and the One Hyde Park project being overseen by designer brothers Nick and Christian Candy.

Mr Cook said: "In most areas, houses accounted for 70 per cent of the deals over £5 million in 2007. However, the trend seems to be shifting towards super-luxury flats in exclusive new developments, led by the extraordinary prices rumoured to have been paid at One Hyde Park.

"The year also witnessed an expansion in the range of the wealthy overseas buyers looking to buy in London. In 2006, the Russian buyers dominated the ultra-prime market but last year 11 per cent of buyers were Indian and eight per cent were from the Middle East."

Richard Gutteridge of Knight Frank's Sloane Avenue office said: "We have been agreeing sales at above £5 million at and above the asking price since the New Year.

"The Russian and Indian buyers in London are now competing fiercely against each other, which is pushing up prices at the very top.

"In search of the very best they either want massive freehold houses in places like Chester Square and Chelsea - or the new luxury apartment developments with high security and everything included, such as The Knightsbridge."

Liam Bailey, head of research at Knight Frank, said the number of £5million-plus homes had grown so much that the "super-prime" threshold was now £10million.

He continued: "The number of these £10million-plus sales is hard to track because many of them take place in private without ever going on the open market. But to our knowledge there were more than 100 transactions above £10 million in the last three months of 2007 - three times more than the 35 sold in the final quarter of 2006.

"This end of the market has not seen any slowing during the last two or three months, despite the credit crunch hitting every other price band."