Professor James Mitchell of Warwick University business school said Britain is already in the grip of a house price bubble and he accused the Government and policy makers of gambling Britain’s economic recovery on rising house prices ‘using borrowed money.’

According to Mitchell’s research there is a 93% probability that London is already in ‘bubble’ territory with property values at risk of collapsing.

He added the probability that properties in the rest of the UK were overvalued currently stood at 77%.

Mitchell said property values in 10 of the UK’s 13 regions were too high.

Only Northern Ireland, Scotland and, to a lesser degree, the East of England are not in the grip of a house price bubble, his research claims.

‘The results raise the risk, although not the certainty, that house prices will fall, although predicting the timing and manner of any fall is even harder than identifying the presence of a bubble,” he said.

‘But a bubble it appears to be and we should all – householders, business people and policymakers alike – be alert to this risk.

‘It is possible that rising house prices, by increasing economic confidence, lead to a more balanced recovery with more business investment, but it’s a gamble using borrowed money.’

After London, Wales was the most likely region to be in the middle of a house price bubble with an 83% probability followed by the North West at 80%.

The South West and North East share a 77% probability; while the West Midlands has a 72% probability.

The South East, meanwhile, has a 65% probability, similar to Yorkshire (67%) and East Midlands (66%).