Properties in the London districts of West Hampstead, Paddington and Chiswick have seen the biggest growth in rental yields in the capital over the past six months, offering promising returns for buy-to-let investors looking for a growing income stream.

Strong tenant demand from young professionals has seen an increase in returns for investors with properties in these letting “hot spots”, as rents have risen faster than capital values, according to research from property consultants Jones Lang LaSalle.

While average yields in the capital rose by 20 basis points over the past six months, properties in Paddington saw the biggest increase, with yields rising by 71.6 basis points. The next biggest risers were Acton and West Hampstead, which saw a growth in yields of 64.3 basis points and 53.7 basis points, respectively.

This comes as rental prices across London have continued to surge, driven by a shortage of good quality rental stock and growing demand from first-time buyers who are unable to get on to the property ladder because of stricter mortgage lending criteria.

According to Jones Lang LaSalle’s quarterly review of London’s residential housing market, the average rental price across the capital has moved from £37.87 per square foot per year to £40.20 – an increase of 6.1 per cent in the six months to the end of this year’s first quarter.

In comparison, the average sale price across London has risen from £718 per square foot to £734 – a pick- up of just 2.2 per cent.

“The very interesting story we’re seeing right now is that rental growth is escalating much faster than capital growth,” says Rob Bruce of Jones Lang LaSalle.

This surge in rental growth has seen average gross yields in London increase from 5.27 per cent to 5.47 per cent. The highest yields in the capital can be found in the south-east: 7.68 per cent in Forest Hill, followed by 7.38 per cent in Upper Norwood.