Residential property returns increased to 16.8% in 2006, marking the end of three years of decelerating returns, according to the Investment Property Databank’s (IPD) UK Residential Index.

Total returns for the year were in line with those on equities and just below those on commercial property (18.1%). Bonds returns were slightly negative thanks to rising yields (-0.1%). Over the last six years, both residential and commercial property delivered returns just shy of 14%.

Ian Cullen, co-founding director of IPD, said: “These impressive 2006 returns reflect the performance of a small group of specialist residential investors. IPD’s major project for 2007/8 is to work closely with the British Property Federation to deliver a major increase in our coverage of this market – targeting significant parts of the estimated £511bn of private housing investment reported by Sue Foxley at the IPD Residential Launch.”