London property no longer looks so safe

A reputation as a safe place to park money during global market turmoil helped drive central London office prices up 52 percent between mid-2009 and the end of 2012. Prices in the smaller luxury residential market grew at a similar pace.

As investors feel calmer about the world in general, they are looking more closely at London property holdings.

"I cannot help but conclude that London is in bubble territory," said Ben Habib, Chief Executive of First Property Group, which owns British and Polish real estate.

"The returns available are very low and capital values vulnerable to a shock."

Commercial property deals reached nearly 21 billion pounds ($33 billion) last year, according to research group Real Capital Analytics. That was double the amount for Paris and four times Berlin.

Over 64 percent of money coming into the market was from abroad - up from 61 percent in 2011 and 55 percent in 2010.

But fears of a euro zone breakup, a slew of U.S. tax rises and spending cuts or sharply slowing Chinese growth have diminished - removing factors that had driven the flow of money.

Meanwhile, concerns over Britain itself have grown.

The economy shrank in the last quarter of 2012, Britain's AAA credit rating looks in danger and the pound is at a 6-month low against the dollar - in part because of outflows from government bonds

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