As buy to let investors look for alternative places to invest their money, it could result in an £18billion withdrawal from the residential market.

A survey by investment services group Skandia found that as property becomes a less attractive asset, the sector would reduce to its average size over the past 10 years as house prices began to fall.

Buy to let purchases now account for 10 per cent of all mortgages, compared with just 1 per cent a decade ago, and were vital in providing a market for many of the more speculative inner city developments over the past few years.

Skandia said that £120bn was now invested in UK buy to let mortgages, and that investors would be likely to sell up as mortgage costs rose while house prices and rental returns were stagnant or falling.

Nick Poyntz-Wright, chief executive of Skandia UK, said: “Private investors have accumulated significant amounts of equity in buy to let properties after a long period of strong growth in home and flat values.

"Higher mortgage rates and falling property prices will cause investors to reconsider their exposure to residential property and many will choose a more diversified approach.”

The firm did speculate as to when the fall would occur, nor provide evidence to support their hypothesis that buy to let investment would fall to the average level for the past decade.

However, the survey came as the first evidence appeared that residential rental returns were falling as homeowners decided to let their properties rather than sell them.