The firm, which runs the retail £29m TM Hearthstone UK Residential Property fund as well as other institutional mandates, said it has an overweight position in London because it is the main area generating growth.
But Chris Down, chief executive of Hearthstone,said the firm was set to look at its London weighting as the market, especially in central London, is a “bit toppy”.
He said the bearish trigger could come if the flow of foreign money into prime central London residential property, which is what has been driving a lot of the headline growth in house prices, dries up.
He said: “When you talk about London it depends on whether you think the flow of overseas money is likely to continue, and we think it will probably reverse at some point and that will have a negative effect on pricing.”
However, Mr Down said that, outside of London, there was no suggestion that UK residential house prices were in bubble territory. He said prices in many regions prices had “not yet returned to 2007 levels”.
He said the residential market outside London was likely to see relatively flat growth this year, but “it will play catch up in 2015 and 2016”.