Property prices in Paris reached their highest-ever levels with an increase of 7.8% in the 12 months to August 2010, with the average cost of a 50-square-metre apartment in the French capital now costing around €334,000 according to the Notarys Association of Paris.

Prices are predicted to continue to rise until the end of the year as demand continues to outstrip supply, and could reach an increase of 10% for the whole of 2010.

Christian Lefebre, president of the Association said: "I dont think we are looking at the same situation that we had at the end of the 1980s when there were plenty of properties for sale. This is the housing market catching up after a drop in prices in 2008 and 2009."

The price increase is not restricted to the capital as according to Insee, the National Statistics Insitute, the cost of apartments across France have increased by 6%, with a rise in average house prices of 5.8%.