It has one of the best addresses in London, lots of space and some interesting history. And it can be yours for about $500-million.

It's the Canadian High Commission offices and residence in central London, which is up for sale as the federal government seeks to cash in on the city's surging real estate market. The building, called Macdonald House, has been the High Commission's headquarters since the early 1960s, when it was bought from the U.S. government, which had also used it as an embassy.

The five-storey structure is certain to fetch a lot of attention. Its location, off Grosvenor Square in Mayfair, is among the most desirable in London, and prices in the area can reach up to £2,000 a sq. ft., or about $3,000. At 135,000 sq. ft., that puts the property's value at close to $500-million.

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"There are relatively few locations which tick the boxes like Grosvenor Square, and there is clearly something of a premium for a location such as that," said Lucian Cook, director of residential research at Savills, a London-based realtor.

The federal government plans to use the proceeds from the sale to renovate Canada House, a historic building off Trafalgar Square that has been used as a cultural centre for Canada since 1925. The government is also buying an adjacent building for about $100-million and turning it into office space for the commission's 250 staff.

The federal government has tried to sell Macdonald House before. It was put on the market in 2008 as part of a plan to consolidate the commission in Canada House. But the sale was pulled when the financial crisis hit and the government re-considered its options. The plan was revived after High Commissioner Gordon Campbell approached the owners of the building beside Canada House, which is currently British government offices.

"We did what you sometimes do, we said, 'Would you be willing to sell this,' and we got to a point where they said, 'Yes,' so we acquired it," Mr. Campbell said on Friday. The purchase will be financed through the sale of Macdonald House.

Canada House will also be renovated and integrated with the other building, Mr. Campbell said, and the entire project should be completed in about 18 months. He added that Canada House is not expected to include a residence for the high commissioner, meaning that another property will have to be bought.

It's not a bad time to sell. London's real estate market has bucked the economic downturn in the rest of Britain. While home prices elsewhere in the country have fallen by about 10 per cent in the past five years, prices in central London are up 21 per cent. And they have climbed 30 per cent in Mayfair.

Even higher taxes have not dampened demand for high-end properties. In 2012, 402 houses sold for more than $8-million, an increase of 14 per cent from 2011. That came despite a hike in taxes on the sale of expensive homes to 7 per cent from 5 per cent.

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The gap between prices in London and the rest of Britain has hit record levels, raising concerns about just who can afford to live in the capital. The average price of a home in London is about £372,000, or almost $600,000. That is more than twice the national average, and four times higher than regions like North East England.

To put the discrepancy into perspective, the total value of all houses in 10 London boroughs is close to $900-billion, according to a recent report by Savills. That's equal to the value of every house in Wales, Scotland and Northern Ireland combined. The housing stock in London's Westminster district alone, which has about 121,000 units, is worth twice that of Edinburgh, which has a population of 500,000.

Most of London's boom is being driven by foreigners, mainly wealthy investors from Eastern Europe, the Middle East and Asia. Purchases by those buyers have soared in recent years as the British pound dropped in value against other currencies, and they now account for about 60 per cent of sales in central London.

Mr. Cook and others say London's real estate market has become dysfunctional and shows signs of a bubble. It is also pushing people out of the city and making it difficult for the government to co-ordinate a national housing policy. "Many areas of inner London have become prohibitively expensive for local residents, and too many luxury flats remain empty and treated as lucrative investments," said a recent report by the Smith Institute, an economic think tank in London.