The latest data from haart estate agents shows that confidence in the housing market is back with a staggering 100% increase in activity levels in December from 12 months ago.

And after a period of realignment, average house prices in London notched up 1% over December. The average price of property in London is now £233,317 up from £230,852 in November.

The London housing market finished the year on a high with prices rising by over 3% throughout the last quarter of 2005. High salary levels, a shortage of good quality stock, record Christmas city bonuses and renewed confidence have all contributed to boosting prices, said the estate agent.

First time buyer levels

Along with increased sales transactions there are early signs that first time buyers are coming back with a vengeance with 1% increase in first time buyer levels to raise it to 23% in December from 22% in November.

2006: Renewed confidence and release of pent up demand

The rise in activity levels and more pertinently the first time buyer level reflects an increase in confidence as potential buyers that have been sitting out waiting for the market to turn have finally accepted that the market is not going to crash.

Paul Smith, chief executive of haart said: "The housing market has been readjusting over the past 18 months on the back of higher interest rates and price sensitive buyers. However now we are seeing higher levels of activity and house prices creep up, as confidence has started to return with a vengeance."

"We expect this positive level of activity to carry over to the first half of the year and as 12 month’s worth of pent up activity is released we expect prices to rise by 5% in the first half of the year. However we believe this level of activity will cool down towards the end of the year and the annual growth is set to be 2-3% for 2006."