They're also set to benefit from measures introduced by Prime Minister David Cameron's government aimed at stoking construction and reviving the economy. The government's March budget announcement included 1 billion pounds of incentives aimed at spurring multifamily residential development and easing a housing shortage.

“These projects represent a wide range of innovative models and will provide a good spread across England, with around one quarter in London,” Housing and Local Government Minister Mark Prisk said in April

A month after the incentives were introduced, about 700 million pounds had been allocated to 45 projects around the U.K. The developments could produce as many as 10,000 homes, the government estimates.

“Those are the seed assets that we will see in future years acquired by institutional money once they're built, leased up and tenants are paying their rent,” Grainger's Joplin said in a telephone interview.

Eoin Treacy's view By any measure London is one of the world's great cities. The financial centre and the city's attraction for ultra high net worth individuals act as powerful anchors for the property market. The fact that so many people move to London for education and work are also powerfully bullish factors. However these arguments are all demand focused and bull markets do not survive on demand alone.

One of the primary reasons London property prices weathered the financial crisis so well, and have subsequently hit new highs is because supply is limited. Property crashes in Ireland, Spain and the USA were preceded by massive building booms, where a great deal of additional supply soaked up and eventually overwhelmed demand. Therefore the extent to which new supply is eventually brought to market in London is likely to prove the single most important consideration for the health of the bull market.

Incentives to increase supply should be beneficial for the building sector and continue to be priced into related shares. (Also see Comment of the Day on August 22nd 2012). Persimmon, Taylor Wimpey, Barrett Developments, Redrow Developments, Bovis Homes, Bellway and Berkeley Group all completed their bases in the last year and rallied particularly impressively over the last few months. They are all somewhat overextended relative to their 200-day MAs and have at least paused over the last few weeks. Breaks in their progressions of higher reaction lows would be required to confirm mean reversion is underway.