This divergence has been one of the most striking features of the property recovery - not least because it was unexpected. In the previous boom-bust cycle, running from the early 1980s to about 1995, London house prices were more volatile than those in the regions. They rose more in the boom, but fell more in the bust. Given London's dependence on the banking industry, commentators expected a similar pattern to emerge during the banking crisis.
But it didn't. Both London and the wider country fell by about 20 per cent between the autumn of 2007 and the spring of 2009, according to Nationwide. Since then, however, London has risen by 24 per cent and the country by just 9 per cent. Relative to the national average, houses in the capital are now at their most expensive for 30 years.
To read the papers, one would imagine a mysterious elite of 'global investors' - Russian oligarchs, Saudi sheikhs and Greek shipping magnates - have been buying up great swaths of central London. This is one strand of the story, and it has a disproportionate impact on the statistics. But let's not forget it affects only a few ultra-smart postcodes around Hyde Park.
In fact, London contains a whole range of micro-markets, many of which behave more like the regions than the West End. House prices in roughly half of London postcodes remain below their 2007 peak, says Richard Donnell, director of research at housing consultancy Hometrack. These tend to be the more deprived neighbourhoods of outer London - Plaistow, east of the Olympic Park in Stratford, wins the wooden spoon, with prices over 20 per cent below peak.
Meanwhile, those areas that have performed well have done so for a range of reasons. Hometrack identifies four distinct groups. First, the famous terraces of Belgravia and Knightsbridge are 20-40 per cent more expensive than they were in 2007, largely thanks to their popularity with the jet-set. Second, some areas of central London such as King's Cross and Clerkenwell have performed almost as well despite being much cheaper. For Hometrack, these are 'emerging prime' postcodes that have appealed due to location, value-for-money and regeneration.
Third, broad swaths of 'domestic prime' London - the places where City bankers and corporate lawyers buy family homes - have performed solidly, if not spectacularly. Prices in areas such as Fulham and Richmond are 5-15 per cent above their 2007 peak. Finally, a whole range of much cheaper postcodes (Whitechapel, Kentish Town, Peckham etc) have put in similar performances as 'emerging domestic' markets driven by regeneration or new transport links.
Any attempt to segment the London property market is going to be simplistic, but this does make the point that global billionaires are not the only buyers in town. However, I will return to them, firstly because the top end of the market pulls the rest of the capital up - the super-rich displace the merely wealthy to 'domestic prime' addresses, in turn displacing the middle classes to 'emerging domestic' areas - and secondly because it is driven by a unique, poorly understood set of economic forces.
Since the credit crunch, the usual motors of housing demand - jobs and wages, credit conditions, affordability and rental yields - have made little difference to prime central London. Instead, demand has come from investors seeking somewhere to park cash, seemingly irrespective of returns. Top-notch London property is sometimes glowingly compared to gold as a 'safe haven', because it’s similarly hard to create and historically resonant.
In a recent report commissioned by Development Securities (DSC), Fathom Consulting identifies another wave of safe-haven demand during the late 1990s. During this period, it argues, cash flowed into sterling assets because European investors needed a hedge against the soon-to-be-created single currency. Now, of course, they are worried about the euro's future. But if the single currency did break up, a major source of investor uncertainty would disappear, and property in the new currencies of southern Europe would look very cheap. Fathom reckons the value of prime central London housing would fall by 50 per cent.
This theory strikes me as far-fetched, but it does make a number of interesting points. First, prime central London housing may be immune to the country's wider economic problems, but that does not mean it cannot fall; it simply has different demand drivers. Paradoxically, an improvement in investment conditions elsewhere might take the wind out of its sails.
Second, it is even harder to predict the course of the prime market than that of mainstream house prices. The investment flows that have buoyed Knightsbridge since 2009 depend on sentiment and expectations, which are hard to quantify and can change rapidly.
Property broker Savills reckons price growth in London's prime addresses slowed to a virtual standstill in the second and third quarters. Is that because of the government's new 7 per cent stamp duty on house transactions over £2m and other measures designed to wring more tax out of non-dom buyers? It's too early to tell, but if global investors decide the political posturing in London is for real, the safe-haven premium could peter out. I'll leave the political pundits to debate whether a more affordable Knightsbridge would really make broken Britain whole again.
