Tom Cruise does it. So does Madonna. Some reports say Woody Allen wants to do it too.Why do celebrities leave New York and come to London?

It might just be the quality of life - it probably isn't because of the cost of property. London is a little cheaper but the two markets are very similar, with 1999 providing big increases in house prices in both cities.

Most New York homes are rented, but costs are spiralling. A few rent-controlled flats remain available at about $700 (£440) a month but most cost much more. A one-bedroom apartment in the controversial Trump Tower - the world's tallest residential block of flats, built just across the road from the UN - can be rented now on the internet for $5,000 (£3,150) a month.

As rents soar, buying is becoming more popular. In Manhattan real estate rose by between 25 per cent and 30 per cent in 1999. Over the previous 10 years property rose in line with inflation, the equivalent of a 41 per cent hike between 1988 and 1998.

'In 1999 there were 10 sales of Manhattan homes fetching more than $10m each,' says Kirk Henckels, a director of Striblings, New York's most respected luxury real estate agent. 'In 2000 the process is, if anything, accelerating. In January and February alone there have been six Manhattan properties sold for more than $10m each,' Henckel adds. 'It's simple supply and demand.'

International estate agents Knight Frank say there are obvious parallels between New York and London. 'Both cities have their more expensive residential property markets influenced directly by the strength of the stock market and things like huge City bonuses, which fuel the buying part of the market for part of each year,' according to residential research manager Paul Belson. 'In London the prices are more cyclical. We have sustained growth in prices,then sometimes followed by prices slowing down or even a slump,' he says.

Nevertheless the firm's lifestyle survey says prime central London locations 'command values among the highest in Europe, if not the world' with up to 25 percent of buyers from overseas.

Knight Frank has compared late-1999 sales and rental figures in the most desirable London areas like the City, Hampstead, the West End and Kensington with those in similarly sought-after Manhattan and Long Island.

London's average prices provide better value, although they are not exactly cheap. But the UK is more expensive in the area surrounding the prime city area. Prices have risen dramatically throughout Greater London.

House prices in Greater London rose by 8.4 per cent during the final quarter of 1999, according to the Hali fax. Annual inflation in the region is 28.9 per cent - the highest yearly rate ever seen in the area and a figure which even optimistic market analysts admit cannot continue during 2000.

In New York outside of Manhattan, the price rises were higher than usual in 1999 but reached 10 per cent in only a few places. Their prices may still be a little higher than London, but the gap is closing fast.

Nevertheless, Americans buying in London are still impressed by what they get for their money. New York interior designer Francis Cannon is moving to London and has seen around a dozen properties on weekend visits. 'Both markets are really hot, hot, hot at the moment. I sold my apartment to the first person who came to have a look. But you get a house in London for the price of an apartment in New York, which is charming and makes it seem as if you get much better value for money,' he says.

Madonna is taking full advantage of London's good value estate agents. She is selling her five-bedroom south Kensington villa for £4.6m, having purchased it just over a year ago for £3.5m. Quite a bonus - especially as she has declined to spend even one night in it.

• Knight Frank, London: 020 7629 8171; Stribling, New York: 001 212 570 2440