This is the view of Mariette Warner, head of property funds at Stanlib Asset Management.

She said in her latest report on the sector yesterday that the biggest risk to listed property prices was an economic shock which would cause a hike in interest rates.

She expected interest rates to remain stable for the year. Because there were good prospects for earnings growth for the sector, there could be capital growth of about 6% in the next 12 months.

Warner said some commentators had expressed concern that the yield on listed property was the same as bonds, but that because listed property was a higher-risk investment, the market was overpriced.

She said the argument ignored the fact that while the yield of listed property and bonds were similar, the income from listed property was growing.

The performance of listed property funds tended to track the performance of bonds because they were both long-term, income-generating investments.

Warner said if bond yields remained stable, listed property price increases would be on the back of earnings growth from their underlying property portfolios.

"The physical property market is very strong, particularly retail and industrial, and with falling office vacancies, office portfolios will start generating growth from next year," she said.

First South Securities property analyst Leon Allison said listed property would give better returns than bonds and cash in the next 12 months.

"Equities could give you a better after-tax return than listed property but listed property carries a marginally lower risk than general equities," Allison said. The fundamentals of the fixed property market were positive and improving but most of this upside had been priced into listed property prices, he said.