Estate agent Marsh & Parsons has claimed that the average price of a two-bedroom property in Prime London could reach £1 million by March 2014 if prices continue to increase at the current rate.

Two-bedroom properties in Prime London appreciated by 14% during the last year, to reach a current average value of £909,203, according to Marsh & Parsons’ latest research.

If this rate of growth continues for the next three quarters, the average price of a two-bedroom property in Prime London will be £975,843 by the end of 2013 and £1,010,974 by the end of the first quarter of 2014.

Two-bedroom properties experienced a much faster rate of growth than other types of properties in the three months to June 2013, with a 6% increase from the previous quarter. The slowest quarterly growth was among four-bedroom properties, the average price of which appreciated by 3% during the last quarter.

Peter Rollings, CEO of Marsh & Parsons, said: “Compared to the rest of the country, Prime London property prices may seem high, but the figures don’t tell the whole story. There is of course a huge variation between different areas in Prime London. Very high value and high demand areas such as Kensington & Chelsea lift up the overall average figures, but there are still many areas of Prime London which represent better value for money. As a result, we’re seeing many young couples and first-time buyers heading to parts of South and South West London in search of more space for their money.

“In addition, the dramatic price increases we’ve seen in the last year bear witness to the rapidly improved availability of mortgages and wider signs of economic recovery which have helped to clear the bottleneck of those who were waiting for the right time to purchase property. But over the coming year, we expect the rate of growth to stabilise in most areas as the Prime London property market returns to normal.”

Marsh & Parsons calculated the average price using the mean average value of all the two-bedroom properties in a mix-adjusted, representative basket of properties across the areas of Chelsea, Kensington, Notting Hill, Holland Park, Pimlico, Clapham, Balham, Battersea, Barnes, Pimlico, Little Venice and Brook Green.

In Prime Central London – including just the areas of Chelsea, Kensington, Notting Hill, Holland Park and Pimlico – the average price of property has already passed the £2 million mark.

An imbalance of supply and demand is contributing to higher prices. During the last quarter, 11% more buyers entered the market in competition for 14% fewer properties. A total of 18 buyers per property were recorded.

The shortage of housing stock on the market has also resulted in demand for property rippling out from the centre. As a result, property prices in less central areas such as Clapham, Balham and Battersea are also increasing rapidly. In Q4 2012, an average two-bedroom property in Prime Central London cost 48% more than the average two-bedroom property in Prime London as a whole. In Q1 2013 this discrepancy narrowed to 45% and in the last quarter the gap closed to just 40%.