Citing new research, a Financial Times report said a growing demand for European property is leading to a battle for assets that is causing prices to escalate and causing concerns that a housing bubble may be in the offing. A PwC and Urban Land Institute report has found that investors are looking for opportunities into riskier markets like Spain and Ireland, riskier endeavors like development and into secondary property which are considered lower quality assets, the report said.

Another data from CBRE revealed that last year, European commercial property investments have gone up the most since the credit crunch. Figures revealed a 21% increase in activity year on year to €154 billion, the report said.

FT said that for the past two years, investors worldwide have increased their real estate asset allocations as returns are getting hard to come by in many asset classes due to the low yields brought about by reduced interest rates and quantitative easing programs from governments. As a consequence, PwC Partner Simon Hardwick said a "huge capital push" is being made into the largest real estate markets in Europe, FT reported.

However, Urban Land Institute European Chief Executive Joe Montgomery told FT that caution is in order since the demand was not necessarily a reflection of economic fundamentals. He said, "With limited signs of tenant demand and rental growth [in some markets], questions remain as to how far the recovery can go."

The report said over half of those included in the PwC survey revealed that prime property in Europe were priced too much because of the large demand. Hardwick told FT, "Intense competition for the limited supply of suitable property will inevitably continue to have an impact on prices, particularly in global gateway cities including London."

Although many of the deals were found in UK and Germany, data from CBRE revealed that fastest growth levels are happening in property markets like Spain, Portugal and Ireland which have experienced severe depression recently, the report said.