The Canadian Embassy has put an eight-storey mansion on Grosvenor Square in Mayfair up for sale with a £300 million asking price.

MacDonald House boasts one of London’s most soughtafter addresses and currently serves as one of Canada’s High Commission buildings. It is likely to be turned into a hotel or luxury apartments, which are expected to sell for upwards of £10 million each.

The agents handling the sale for the Canadian Government said it had received interest in the property from more than 20 property developers and financiers from Britain and overseas in the past few days.

The site at numbers 1-3 Grosvenor Square sits directly opposite the US Embassy and will be the largest sale of a building on the square for more than a generation.

Earlier this summer the US Naval College building on Grosvenor Square was sold for £250 million after a fiercely contested auction to a group led by Richard Caring, the retail tycoon and owner of the Caprice and Ivy restaurants.

The Canadian High Commission building now on the market is larger than the former US naval building by about a third, covering 135,000 square feet.

The Canadian Government has called on bidders for the site to provide a new site for the High Commission which should be located close to its Canada House building on Trafalgar Square, which is not up for sale.

Interest in the property sale and related new development is thought to have come from Candy & Candy, the property development managers linked to a consortium that lost out to Mr Caring’s group on the Naval headquarters sale.

Candy & Candy is behind the One Hyde Park luxury flats scheme overlooking Hyde Park and still under construction, where most apartments have already been sold off plan. Penthouse suites in the scheme sold for more than £84 million.

Demand has soared over the past two years for large blocks of so-called prime central London, ranging from Kensington and Chelsea to Mayfair and Belgravia, as property developers cash in on demand from wealthy City financiers and international jet-setters for multimillion-pound homes in the capital.

The Canadian Department of Foreign Affairs and Trade has hired Grubb & Ellis and King Sturge as joint agents to handle the Mayfair sale and relocation. Steve Mallen of Grubb & Ellis said: “There has already been very strong informal interest in this project from both the domestic and international markets.”

Plans for a short list of bidders are already under way.

Top-flight homes in Mayfair have sold for more than £2,000 per square foot this summer, roughly double that achieved for similar properties just three years ago. Prices are expected to climb to about £3,000 per square foot by 2012.

London has witnessed a sudden influx of wealthy businessmen and their families from Russia and the Middle East who, since the 9/11 terrorist attacks, increasingly see the capital as a safe haven for their money and their business operations.

The Crown Estate, the property company that looks after the nation’s property assets, this week took first round bids for one of its largest sales in central London. It expects offers of £250 million or more for the empty Metropole Building, home to the Ministry of Defence until three years ago, and neighbouring 10 Whitehall Place. The site will be turned into a luxury hotel and flats with Thames-side views over the London Eye.

Last month, a flat in Mayfair near the Cipriani restaurant bought at the end of 2003 for £2.275 million sold last month for just under £4 million, equivalent to nearly 2,500 per square foot. A three-bed Mayfair townhouse nearby bought for nearly £2.2 million in April 2005 sold for £4.7 million last month, Knight Frank reports.

Savills, the upmarket property agent, this week cut back its forecast for house price inflation in prime central London locations from 22 per cent to 18 per cent, but that is still about twice the pace of the national average. House prices for prime central London properties are expected to grow about 10 per cent next year according to Savills, while prices for the rest of the country are expected to remain flat, the Royal Institution of Chartered Surveyors predicts.

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