THE British property market continues to improve. The Investment Property Data Bank reported underlying market returns for 1996 improved to 9.6 per cent, bringing them into line with their long-term average. The key to the improvement was a gentle acceleration in rental growth to 3.1 per cent. While heavy over-renting diluted much of the immediate impact of this increase on capital values, the rental recovery was instrumental in halting the upward creep in equivalent yields, which had depressed returns in 1995.

At 8.8 per cent, the all-property yield at the end of 1996 was virtually unchanged from its level at the end of 1995. However, this inertia masks a rise in the opening months of the year and a fall in the final quarter of 1996, according to IPD.