Economists and central bankers have warned about bubbles in several of the world's key property markets, but it appears investors are now expecting just one to burst in the near future.
London has been on the radar for many "short sellers" - traders who bet that a particular security will fall in price - with even the Bank of England Governor Mark Carney talking of stretched valuations in the capital. But, it now appears these hedge funds and asset managers are putting their money where their mouths are.
"U.K. homebuilders have seen their first bear raid in nearly five years as luxury London property prices stall," Simon Colvin, a research analyst at data firm Markit, said in a note on Tuesday.
Filings to the U.K. financial regulator show that it's the London-exposed housebuilder Berkeley that is peaking the most interest. Firms like Anchorage Capital Master Offshore, BlueMountain Capital Management, Gruss Capital Management and Marshall Wace have taken short positions but either declined to comment or were not immediately available for comment when contacted by CNBC.
Spike in interest
Relte Schutte, an analyst at Markit, told CNBC via telephone that there had been spike in interest in Berkeley in the past week. Shares outstanding on loan - a proxy that Markit use for short selling - has risen to 5 percent — the first time a U.K. homebuilder has hit this level since 2010, according to the company.
Others currently seeing a slight increase in short selling include Redrow and Telford with 2 percent and 1.6 percent of shares on loan respectively, according to Schutte.
London has long been a global hub for property investment, benefiting both from the city's status as a global financial hub and a perception that its real estate is a "safe haven" investment. However, demand for London properties began weakening last year, due to increases in the taxes levied on buyers of properties worth more than £1.1 million and many have pointed to uncertainty over an upcoming referendum on its membership of the EU.
Indeed, the Royal Institution of Chartered Surveyors said last week that London house prices look set to stabilize after sharp periods of inflation. It also said that price expectations had turned negative in prime central parts of the capital, adding that "zone one" properties in the heart of the city were showing signs of downturn.
Next 'big short'?
Analyst Charlie Campbell at Liberum Capital believes that "margin pressure" will hit housebuilders in the coming years as house price inflation is suppressed by a more vigilant regulator and build cost inflation returns.
Anthony Codling and Sam Cullen, two analysts at Jefferies, suggest that the new box office movie "The Big Short" might be spurring investors to short Berkeley in what some perceive as an overheated London housing market.
"We would not short Berkeley Group as its investment case is based on strong foundations," the two analysts argue in a note last month.
"Much like in 'The Big Short' those initially wanting to bet against the U.S. housing market did not have a vehicle to go short against, so they had to create one, however we do not believe that Berkeley Group is the appropriate vehicle."
Markit's Relte Schutte too told CNBC that he "wouldn't put his money" on Berkeley seeing a large movement lower.
Shares of the company are down 17 percent so far this year but have seen a near 250 percent rally in the last 10 years. An interim management statement from the group is due out on Friday and Berkeley declined to comment when contacted by CNBC.
—CNBC's Katy Barnato contributed to this article.