More than pounds 2.7bn worth of new homes are under construction in London and, according to a study by London Residential Research, around half of them have been snapped up by Far Eastern buyers.
While the booming market brings a steady stream of overseas money into Britain, the report's author, Geoff Marsh, warns that it has serious implications for Londoners who are at risk of being priced out of the market.
"It's extremely dangerous. We are seeing overseas investors move out of the areas where they have always bought property, such as Hampstead and Mayfair, into areas as far afield as Kennington, south of the Thames. This helps hike up the price, making not only new property unaffordable to many Londoners, but also has a knock-on affect on the price of secondhand property."
The neighbourhoods in which foreign investors are keen to buy are Hampstead, Islington, and the City of London, which for many years was dominated by offices. But in the past 18 months residential development has soared. "There is a feeding frenzy among developers frantically searching for land, and buildings to convert into flats," said Mr Marsh.
Demand has pushed prices so high that it is now hard to find a two-bedroom apartment for less than pounds 250,000 in the centre of Westminster.
And while Londoners may have associated high rise with tower blocks for the poor, the international buyers are keen to seek out "rooms with a view". For the first time in 20 years, work is underway in several areas of London to build high-rise blocks of flats.
Overseas customers are so keen to invest their money in central London that they buy property before it is built, on the basis of sketches and plans on display at London property exhibitions held by developers in Far Eastern hotels.
Some investors are buying up to a dozen new flats at a time, while others purchase apartments for use by their children while they study at British universities, and rent them out after graduation.
A big incentive is that Britain is one of the few countries left where, as long as they retain a foreign residence, property owners from overseas will only be taxed on money made in the United Kingdom.
Although the Asian tiger economies' currencies and stock markets have plunged in recent weeks, putting question marks over the region's future growth, there is little evidence that it will stop Far Eastern funds flowing into London property.
Some estate agents believe that the fall-out will occur in the next few months, but others believe the turmoil in the East will only serve to make London property appear an even safer investment. And with rent for a standard London two-bedroom apartment in an attractive neighbourhood averaging pounds 2,000 a month, the lucrative income from such properties makes them highly attractive investments - offering both revenue and capital growth.
In the past year, some of the richest Far Eastern investors have turned their attention to buying what Mr Marsh terms "palazzos" - office blocks of up to 50,000 square feet converted into single luxury homes.
While the conversion of old office blocks into several apartments has become one of the most popular housing trends in London, the amount of money that Asian buyers can offer makes turning an office building into a home commercially viable.
One such property in Chesterfield Gardens, near Berkeley Square, offering 50,000 square feet of air-conditioned space was sold for pounds 40m as a palazzo, while another, smaller, former office block in nearby Hill Street is on sale for pounds 16m.Reuse content