Two new reports published today are calling for new curbs on housing market investment to prevent a dangerous bubble forming in London.
Think tank Civitas says wealthy foreigners should be banned from buying UK property solely as an investment.
And the influential EY Item Club is also releasing a report warning about the influx of super-wealthy buyers.
Civitas said the influx of overseas money has fuelled "rampant house price inflation" and forced millions of middle and low UK earners out of the property market, according to Civitas.
Its new report, Finding Shelter, says that 85% of prime London homes in 2012 were bought by foreign investors. Two-thirds were solely for investment purposes and never lived in.
Civitas is calling on the government to stop existing homes being sold to buyers from outside the EU, and says foreigners should only be allowed to buy new homes if they can prove this would lead to more properties being built.
Co-authors David Green and Daniel Bentley, said: "London property is now seen for many in terms of its investment potential, as a safe haven for cash in an unstable global economic climate, rather than something that should be meeting a basic social need for the capital's residents.
"For too many it is providing financial shelter rather than human shelter."
The influential EY Item Club is also set to release a report today warning about London's influx of super-wealthy buyers.
It will argue that overseas demand for high-end London property is fuelling a housing bubble in the capital, and measures are needed to cool the market.
Andrew Goodwin, senior economic adviser at the EY Item Club, said: "House prices across most of the country remain well below their pre-crisis peaks and there seems little danger of a bubble developing.
"But London, which is suffering from a combination of strong demand and a lack of supply, is increasingly giving us cause for concern."
Fears over the pace of house price growth in the capital have grown lately, with half of brokers now fearing a bubble.
The Item Club study predicts UK house prices will rise at a rate of 8.4% this year. It says they will rise 7.3% next year and about 5.5% the year thereafter.
London house prices leapt 11.2% in 2013 to hit an average price of £403,792, according to latest Land Registry figures.
Prime London property is now 27% above its their 2007 peak, Savills says.
The Item Club study said soaring prices at the top end are trickling down throughout the market and predicted the average London home will cost more than £600,000 by 2018.
Its report said international interest in London property had been "very high due to a combination of heightened risk elsewhere in the world, low returns on other assets such as bonds, equities and cash, and a weak pound, which has made London properties cheaper for foreigner buyers".
The Item Club said that London should be treated as an investment market, rather than a residential market.
It called on the Bank of England to consider blocking people from being able to borrow more than three times their income
Comments