Private investors are looking to place cash elsewhere as property becomes a less attractive asset thanks to decreasing property prices, according to investment services group Skandia.

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

Buy-to-let investors could withdraw £18bn from the residential market as they find better places for their cash, according to the group. Buy-to-let purchases, which now account for 10% of all mortgages, compared with just 1% a decade ago, have been vital in providing a market for many of the more speculative inner city developments over the past few years.

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 not offer a timescale for when the fall would happen by, or evidence to support their hypothesis that buy-to-let investment would fall to the average level for the past decade.