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Buy-to-let investors borrowing at 90 per cent loan-to-value have lost up to 90 per cent of their investment since the market peaked last year, according to a new report from Hargreaves Lansdown.

A recently published report by the Bristol-based IFA, Buy to let: A risky business, sets out the pros and cons of buy-to-let investing as a pension plan, comparing returns from property and equities, and highlighting the main issues which investors should consider before committing to a property purchase.

The 9 per cent fall in house prices from their 2007 peak means that investors providing a 10 per cent deposit would be left with one-tenth of that amount were they to sell their property now.

Laith Khalaf, pensions analyst for Hargreaves Lansdown, said: "The biggest issue is the degree of gearing involved, and the volatility which that introduces. By borrowing 90 per cent of your property you can magnify returns, but also losses when times are bad. And you also have to service the debt, so you may be forced to sell when you do not want to."

Mr Khalaf said: "As a retail investment, buy-to-let is not a viable alternative to putting money into a pension, because of the risks involved, and the tax advantages of a pension.”

In addition to the potential for a slump in prices, Mr Khalaf said that other risks were the prospect of an increase in interest rates over the term of the mortgage, the possibility of vacancy periods, and the liability for letting costs.

He also said that lack of diversification was another risk, since one-third of landlords own only one property.

However, he said: "If you can provide a large deposit, you are well-positioned to ride out a market downturn. A 50 per cent deposit, say, gives you a buffer against price falls and means you are paying less interest."

But he added: "If you reduce your buy-to-let loan to a more acceptable level, the returns compare less favourably with a pension investment."

Phil Perry, director of Manchester-based IFA ARK Financial Planning, said his company was still advising clients investing in buy-to-let properties, either as professional landlords or private investors.

Mr Perry said: "There is more risk for non-professional landlords because they tend to look more to the short-term."

Mr Perry said: "Clients who want to purchase a buy-to-let property as a pension should be doing so in addition to, not instead of, their pension plan. They should be aware of the facts and the costs and be prepared to leave the property for a few years."

IFAs can obtain a copy of the report by calling 0800 138 2121.