One of Britain's largest private landowners is betting that the London luxury property market is at its peak after warning of a housing bubble that will burst if interest rates rise as expected next year.

The Duke of Westminster has sold £240m of prime properties in central London over the past 12 months, his property company revealed yesterday, after admitting concern over escalating prices. Such has been the scale of demand for £30m-£50m houses in the capital that members of the globetrotting wealth set including Eric Schmidt, the billionaire chair of Google, have struggled to find a suitable London home.

However, the finance director of the Duke's Grosvenor Group admitted that the luxury market could be on a precipice. "There is a risk that a bubble is developing and that when inevitable interest rate rises occur … equity flows will reverse, placing values at risk," said Nicholas Scarfe. He added: "We do not know when a correction will occur, but our own analysis indicates the prospect of a correction is becoming more likely."

Grosvenor's concerns could have repercussions for the wider UK housing market if they spread to the rest of the capital's property stock. The behaviour of the London market has drawn warnings of a "superbubble" after posting a 17.7% rise in average prices to £458,000 in the year to February. But top-end housing is in the vanguard. Demand from foreign investors has pushed luxury home prices in London up by 68% since 2009, compared with a rise of 49% for the London market as a whole, according to Knight Frank.

Grosvenor Group, headed by Gerald Grosvenor, one of Britain's richest men, has nonetheless reduced its exposure to luxury homes – as a landlord and property developer – in postcodes such as W1, SW1 and NW1. The properties sold last year include a row of mid-19th-century terraces on Grosvenor Crescent in Belgravia, which was bought by UK property firm Wainbridge for £114m.

Mark Preston, Grosvenor's chief executive, said: "We had concern about the level of pricing at the top end, so we thought it would be prudent to go ahead and sell some developments." He added: "I'm more concerned about it [top-end price growth] than I was last year."

The company is banking on more growth in the lower rungs of the London rental market to catch middle-income professionals who cannot get on the housing ladder. Branching out from its traditional turf, it is venturing south of the river to invest in building more affordable rental homes in Bermondsey.

Grosvenor's top-end central London homes typically cost £1,750 per square foot to rent, which compares with £550-£600 per square foot in Bermondsey.

Matthew Pointon, analyst at Capital Economics, backed Grosvenor's concerns that house price gains in the capital are not sustainable. The economics consultancy is predicting a sharp slowdown in prices in the capital as a whole, from an estimated 16% this year to 5% next year.

Grosvenor's warning came as the company reported a 38% increase in pretax profits to £506.9m for 2013.