House prices have been inflated by buy-to-let investors, according to a report by the government’s housing affordability advisers.

The report, by the National Housing and Planning Advice Unit, shows that prices in the second quarter of 2007 were up to 7% higher than they would have been had there been no buy-to-let mortgages.

The report, Buy-to-let Mortgage Lending and the Impact on UK House Prices, adds that buy-to-let investors are often competing with first-time buyers and that a downturn in such lending could drive down inflation.

Stephen Nickell, chair of the unit, said: “Without buy-to-let, real house prices between 1996 and 2007 would still have risen by 130%. Other factors, such as interest rates, growing numbers of households, rising incomes and constrained housing supply have contributed much more to price inflation.”

“That is not to say that the increase caused by buy-to-let has had no effect. If buy-to-let lending is stripped out then the average mix-adjusted house price in the second quarter of 2007 could have been £169,000 rather than £183,000.”