Why property buyers are once again circling London's Square Mile

The City of London has always been peculiar. It was founded by the Romans in about AD50 and today the Square Mile - with its unconventional power structure and traditions - has enjoyed almost 2,000 years of uninterrupted democratic self-governance. In that time, kings, queens, conquerors, two Lord Protectors and various parliaments of different hues have, by and large, thought it wise not to interfere too much with this hub of commerce, lest they kill the golden goose and all its revenue-raising power.

With this in mind, the City was excluded from changes to planning law in 2013 that made it easier for offices to be converted into residential buildings - an amendment that helped fuel house price rises across the capital.

"The City is in what we call the central activity zone," says Adam Challis, head of residential research at Jones Lang LaSalle, "and as such has an exemption from the changes which, frankly, I think is absolutely the right decision".

Challis says: "Office leases come up for renewal every four years or so . . . but once you go to residential, effectively you've made that decision in perpetuity; in the City that would have been a disaster."

However, restricting the pool of housing - there are fewer than 5,000 residential units, according to City of London Corporation figures - has helped the market look somewhat erratic. "Last year was a tale of two halves. From January to May we saw unsustainable and unprecedented growth," says Alex Rusling, of Hamptons International, who estimates prices rose between 15 and 20 per cent in that period. "Then all of a sudden, the pool of buyers shrank almost overnight."

Bernard Cully, of Jones Lang LaSalle, says a major factor in last year's mini boom and bust was mortgage accessibility. "We had a quarter where momentum was very high," he says. "Then [Mark] Carney [Bank of England governor] decided he was going to put strong restrictions on mortgages . . . which slowed everything down."

But things are now looking up. "Since January we've been delighted with how things have progressed," he says. "We've not seen the rate of growth we did this time last year, but the pool of buyers is back and they're serious buyers too."

While the City is a small market, it is also a fractured one, with agents saying average prices are hard to determine. Several new-build developments have, according to Rusling, reached £1,500 to £1,600 per sq ft; but with older, resale properties, prices are more varied. Rusling says almost all properties in the City are apartments, and most of his buyers are bankers seeking a weekday pied-a-terre. What families you do get are drawn to the Barbican Estate, a brutalist tour-de-force built in the 1960s and 1970s that today houses about 4,000 residents - more than half the City's entire population.

Estate agency Frank Harris is selling a three-bedroom apartment arranged over three floors in Willoughby House on the Barbican Estate for £1.55m.

The agency is also gearing up for the launch this month of the Fann Street apartments, a collection of 74 units being converted from an old YMCA building by developers Redrow.

Though they will be the last new apartments in the estate, they may have limited appeal to Bernard Cully's buyers at Jones Lang LaSalle, a large proportion of whom are investors rather than end users. "Most property investors know they shouldn't buy into a property just because they like it," he says.

New builds in the area are abundant and include The Heron, a 285-unit tower near the Barbican. "The Heron is at the top of its game," says Hamptons' Rusling. "Not just the location, but what it offers people in terms of security, amenities and standard of finish."

Rusling isn't marketing anything at The Heron, but CBRE has the South Penthouse, the development's largest apartment with four bedrooms and a home cinema room for £15m.

Similarly, the arc of new builds on the fringes of the Square Mile, from City Road to Whitechapel, is creating a stir. "The optimism on that side of town is incredible," says Cully, who is marketing a two-bedroom apartment in the Cityscape building, Aldgate, for £950,000.

Jones Lang LaSalle's Challis expects to see the City market outperform that of prime central London. Because there are few apartments large enough to threaten the £2m threshold, it has largely been immune from the nervousness that the possibility of a mansion tax has brought to other markets.

"I think we'll see the City and the City fringe become legitimate high-value locations in their own right. Compared with five to 10 years ago, that's quite a change," says Challis.

• The City has a resident population of 7,400 but more than 300,000 people commute to and from the area every day

• Former investment banker Alan Yarrow is the current Lord Mayor of London and presides over the City's two governing bodies - the Court of Aldermen and the Court of Common Council

• The City has a reputation for being a ghost town at weekends, but new retail outlets such as One New Change, and restaurants like Duck & Waffle, which is open 24 hours, are changing this

• Good prep schools in the City include the independent St Paul's Cathedral School and Charterhouse Square

• A total of 5,318 crimes were reported in the tax year 2014-15, according to City police, a 2 per cent fall from 2013-14

£500,000 A studio flat in the Barbican

£1m A one-bedroom property in a new development such as Barts Square

£4m A three-bedroom penthouse in a newly developed tower with good views

Photographs: Justin Foulkes/4Corners; PHILIPVILE

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