Prices for flats have increased by an average of 0.7% in January across Canary Wharf, Shad Thames, Wapping and Bow, according to a report from London estate agency, Felicity J Lord.

As expected, activity picked up considerably in January after the usual seasonal slowdown as buyers and sellers held off over the Christmas period. The average flat now costs around £284,295.

The renewed confidence in the housing market and record city bonuses have also boosted property prices across the City.

A lack of suitable properties available on the market coupled with an increase in demand, especially in key central areas including Canary Wharf, has supported prices this month. This increase in buyer demand has caused the number of transactions taking place in the market to increase by a considerable 19%.

Darren Box, managing director of Felicity J Lord said, "January is usually a busy time of the year for us. Once the Christmas period is over, we often see a surge of interest as buyers who put off the search in December come back to the market with a vengeance."

Buyers become less price sensitive

As activity and demand continue to increase across the City, the time taken to sell a flat has decreased. In January, the average time it took to sell a flat decreased to 50 days, compared with 54 in December. This improvement in market conditions further consolidates the revival across the City.

Buyers have become less price sensitive due to increasing confidence and demand, said the firm. As a result, the average reduction on asking price in January decreased slightly to 4.5%. But despite buyers negotiating smaller discounts than previous months, sellers still need to realistically price their properties in order to achieve a sale.

Darren Box said, "As incomes continue to rise and city workers invest their bonuses in property, all factors indicate that London is heading for a revival. As such, I continue to forecast a rise across the City of as much as 5% in the first half of 2006."