Residential investment property outperformed all asset classes in 2009 with total returns of 11%, Investment Property Databank (IPD) reported today.

IPD’s 2009 residential index shows the sector’s performance split between 8.1% capital growth and 2.7% income return. The results compare with just 3.5% total returns for commercial property last year.

Now in its ninth year, the index reveals that the recovery in values in central London last year underpinned the returns of institutionally owned residential assets, offsetting big regional variations in performance.

London accounted for nearly 60% of IPD’s £3.8bn of residential assets under measurement and achieved the highest total returns: 14.2%. By contrast, Scotland was the worst performer with residential assets there showing losses of 8.7%.

Though the index reflects the widely reported recovery in the wider housing sector last year, IPD said the results also indicated longer term out-performance. The index shows residential delivering 3.1% total returns annually over three years and 6.8% annually over six years.

At the launch of the index in London today, Mark Weedon, IPD’s head of UK residential services, told investors: “In 2009 we saw a strong recovery by the residential sector, largely driven by the turnaround in growth by prime central London stock, which has rebounded most quickly.”

Weedon added: “Residential market let investment has consistently rewarded investors with greater returns than commercial property, despite lower income returns.”