Illuminating new research from Knight Frank/Citi Private Bank has discovered that London is officially the most expensive city in the world in which to buy property. London has fended off traditionally expensive cities such as New York, Tokyo and has even outstripped prices in Monaco.

The research suggests that pricing for £1 million plus homes has been fuelled not only by wealthy foreign individuals (59% of the luxury property market in London) but also by the large City bonuses on offer.

The top 20 most expensive cities to buy a property (£ per square foot) are -

The buy to let property market in the UK is currently being fuelled by a number of increasingly affluent landlords in the belief that bricks and mortar will provide the best form of investment available. Recent research suggests that 1 million more individuals are set to purchase a buy to let property in the next four years and by the year 2011 the number of buy to let investors will have doubled.

Factors determining investment in buy to let property include worries about inadequate pensions, higher divorce and immigration rates and an ever increasing student population leading to a demand for rental properties.

Currently 1 in 10 mortgages granted in the UK is for buy to let investors with 58% having two or fewer properties. Obviously it will not have gone unnoticed amongst these investors that average rents have increased by 53% in England in the last decade.

Economists are predicting further interest rates being made by the Bank of England this year but at this time this is not slowing the appetite for the voracious UK buy to let investor.

Property in the most salubrious areas of London are currently growing in price faster than any other time in the last 28 years according to estate agent Knight Frank. The estate agent claims that £1 million plus houses in the smart areas of London such as Mayfair, Chelsea and Belgravia increased in price by 2.6 % alone in the month of February and during 2006 the increase was a staggering 31% overall.

It is believed that the surge in prices is being fuelled by huge City bonuses and an influx of millionaire buyers from overseas countries such as Russia and Italy.

Knight Frank believe that the price increases in central London will continue well into 2007 and forecast an overall increase of 12% for the year. This forecast is believed to be on the conservative side due to increases so far this year of 5.6%.

Ordered by highest percentage increases from the years 2005-2006

Statistics courtesy of the Nationwide Building Society and Rightmove