[LONDON] Developers of prime London homes, the best-performing properties in the UK since 2009, risk being squeezed by spiralling land prices and building costs as the luxury market cools.

"The biggest risk for developers is overpaying for a site based on the assumption that sales values in two or three years' time" will be rising, Mark Farmer, head of residential at consulting firm EC Harris, said. "That's a very dangerous game to play. More importantly, they need to be factoring in construction-price inflation."

Investors betting on the boom continuing pushed up residential-land prices in the best London areas by almost 14 per cent in the year through September, according to Knight Frank LLP.