This was according to managing director Rodney Squire Howe, who said in the annual report of the listed property loan stock company that the expected economic growth would lead to an expansion in businesses, which would have a positive impact on vacancies and rentals.

He said the jury was still out as to whether the current "hot" property prices were a structural adjustment to the new economic environment or a result of a temporary surge in market demand

"There has been a bit of a feeding frenzy of property purchases in the listed property sector, as the assembly of several new property funds prompted strong acquisition activity. The net result of this activity was an increase in prices, which last year made it difficult for Paraprop to make acquisitions and raise new equity," he said. 

Notwithstanding this, Paraprop recently bought R100 million worth of new property, including the Swiss Re building in Claremont, Cape Town, and A-grade office blocks in Morningside and Bryanston in Johannesburg. Two properties were sold last year.

"We anticipate a modest increase in the current distribution of 49c in the coming year. No further dilution is expected for the year ahead, despite the conversion of the next tranche of B debentures early in January."

The vacancy rate stood at 3 percent and more than half the leases in the portfolio had been renewed at current lower levels.

As a result of a deal last year in which Absa became a major shareholder, borrowings were reduced to under 60 percent of portfolio value from 64 percent, and a further reduction was anticipated in the year ahead.

The price of Paraprop units fell 1c to R3.29 yesterday.