London has its own economy when it comes to property. Prices have soared to a new record high just in a month (+10%).
So yes, I think the capital is overheating.
Maybe - I can't see prices ever dropping significantly though. Maybe 20%, but they'll always be intimidatingly expensive for first-time buyers.
Lehman Bros collapsed because their computer models excluded the possibility of a major decline in real estate prices. Investor confidence is a contrary indicator.