The managing director of the fund, Rodney Squire-Howe, said in the company's latest annual report that the expected growth would lead to an expansion in businesses, which would have a positive impact on vacancies and rentals. The steady recovery in all sectors of the property market would also reflect positively on Paraprop's portfolio. 

"The past year was a difficult one for the fund as we saw a material decline in earnings per linked units. "This was mainly due to the poor property market conditions linked to the fund's particular financial structure.

"As a result of the economic recovery and changes to the fund's structure, no further dilutions are expected for the year ahead and we anticipate a modest increase on the current distribution of 49 cents in the coming year.

"Having come through a tough year, Paraprop's fundamentals are now in place with high quality properties, focused management and competitive finance. "Although we do not anticipate a major turnaround, we do expect to benefit from the steady recovery in all sectors of the property market."

Squire-Howe says the lower interest rates and revival of world economies would also boost the improved growth prospects for our local property market. "However, the new economic environment of low inflation and low interest rates are changing the context of our business environment. The resultant lower nominal returns from investments and lower yields from property will impact on acquisition yields going forward."

Squire-Howe noted that the jury is out on whether the current property bubble with its hot property prices is a structural adjustment to the new economic environment or a result of a temporary surge in market demand.

"The feeding frenzy of property purchases was also prevalent 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 made it difficult for Paraprop to make acquisitions and to raise new equity. "But we have resisted in purchasing poor quality, high yielding properties and remained focused on bedding down and extracting value from our properties, and improving the financing and financial structure of the company.