Hamptons International’s latest data tracking the best residential investment yields across London and Southern regions of the UK for Q1 2008 found that investors generate the strongest income return from well-located flats.

Across all property types ranging from 1-bed flats to 5-bed detached homes, the strongest average yields in London were found in Islington (5.43%), Kensington (5.19%) and the City (5.08%). In addition, 1-bed flats through to 3-bed flats provided the strongest return, as on average, these types of properties generated as much as 73% more than returns for terraced, semi-detached or detached property.

In Q1 2008, figures revealed that the average yield was 4.85% for a standardised freehold/long-lease flat of approximately 500 sq ft and in good order. Comparatively, a 5-bed detached house with a garden, in good order and offering 3,000 sq ft of accommodation provides an average yield of 4.12%.

For buy-to-let investors or landlords looking to top up their portfolio outside London, the strongest yields generally come from smaller units like 1-bed and 2-bed units. Some of the best yields are found in Brighton (4.32%), Hove (4.22%) and St Albans (4.02%).

Rob Bruce, research manager, said: “Despite the well-publicised increase in the cost of capital, rental levels continue to escalate above house price inflation, pushing yields higher. For those looking to acquire new assets and happy to accept a longer-term view on capital appreciation, it is worth also noting that the average initial income returns are higher than recent years.”