Some economists have already voiced concerns about a potential bubble forming in UK property, and some hedge funds have reportedly begun shorting UK residential property stocks on expectations of a slowdown in the sector.

Property has been one of the most popular asset classes among UK investors this year as returns have surprised on the upside, causing some managers to worry about the amount of hot money flowing in.

But Aviva Investors’ Chris Urwin, global research manager for real estate, says the boom is far from over and predicts a 17 per cent  to 18 per cent return from UK real estate next year, after this year’s returns are likely to top 20 per cent.

“Yields in some markets – such as central London offices – are now at or near record lows, leading some to ask whether the cycle can go much further. We believe it can and will,” Urwin said.

“Firstly, there are very few signs of an overheating market. For example, there is no evidence of a development boom, and the market is not excessively leveraged.

“Secondly, while real estate may look expensive relative to historic pricing levels, it certainly does not look expensive relative to other low risk, income-producing asset classes.”

Spreads between property and government bond yields are very high compared to levels experienced in the decade preceding the global financial crisis, he added.

In the summer, Aviva Investors raised its forecast for UK commercial property returns to 8.9 per cent per annum over the next five years, from its original forecast of 6.5 per cent.

“Record low yields in parts of the market now look likely,” Urwin continued. “This will generate significant capital growth, boosting total returns in the near term.”

However, he expects returns to trail off by 2016, falling to less than half of the 2015 figure – his forecast is for total returns of around 8 per cent per annum over the next five years.

“We believe that relative performance will be enhanced by underweight positions in central London markets and overweight positions in the rest of UK market segments,” the manager said.

“Offices outside of central London and industrial assets outside the south east look the most attractive on a risk adjusted basis.”