In Prime Outer London, average prices fell 2.9% in the year to January which was the smallest decline since the first national lockdown last March.
The number of transactions in Prime Central London was 12% higher in January 2021 over January 2020.
In addition, the number of new prospective buyers was 14% higher than the five-year average in January.
The total number of market appraisal valuations was 27% below the five-year average as more sellers than buyers hesitate during the third national lockdown.
Analysing transactions over 2020, the £5m to £10m price bracket in Prime Central London noted the greatest rise in the number of sales, up 16.1% from 2019.
This is the largest such increase since 2013.
However, exchanges fell 10% across all price brackets in Prime Central London.
While prices dropped in Prime Central London, annual prices were up 9.6% in Greater London and according to Knight Frank, this demonstrates the reliance on overseas buyers in the former mentioned market.
Furthermore, average rental prices in Prime Central London fell 13% in the year to January amid high levels of supply.
The trend was less marked in Prime Outer London, where rents fell by 10.7% in the year to January 2021.
In contrast, the number of market valuation appraisals for the lettings market rose by 63% versus the five-year average in January.
The data also showed that the number of tenancies started in January was 19% ahead of the five-year average in London, underlining how activity levels remain strong despite falling rents.
Tom Bill, head of UK residential research at Knight Frank, said: “The absence of international travellers means we are in the unique situation of having a stamp duty surcharge that is largely baked into the price before it is introduced.
“Overseas buyers will need to take this weaker performance into account once restrictions are lifted and price negotiations restart.”
David Mumby, head of Prime Central London lettings at Knight Frank, added: “Prime London rents have undergone a fundamental reset.
“Rents are falling and I think the trend will continue until the airports re-open and we see the return of international travel.
“We are not being inundated with new stock at the same rate as last year, but supply levels are still high.”
