In a report issued last week, Catalyst said the South African listed property index had recorded a total return of 24,75% for the year to date. The total return includes income yields and capital growth.

Catalyst said the index produced a total return of 7,79% last month.

The group said industrial property vacancies had dropped to critical levels and office vacancies were also on the decline. This had resulted in demand exceeding supply and an upward movements in rentals.

"In addition, feasibility rentals for new developments are substantially higher than existing rentals, due to the current double-digit building cost inflation and escalating land prices. This, together with debt restructuring, has resulted in most (listed property) funds delivering double-digit distribution growth," said Catalyst.

It said it anticipated "this period of strong income growth to continue".

"The key question will be: how long before it reverts to normalised levels of growth? Key factors at play will be the quantum of new supply created and the length of this sustained period of economic growth," said Catalyst.

Mariette Warner, head of property funds at Stanlib, said there had been a "high level of yield compression" in the listed property sector. This meant there was very little difference in yields from the sector's property companies relative to sustainable income growth potential.

"The risk is that unsustainable earnings levels are being valued (by the market) as if they were a sustainable income stream going into the future. The quality of earnings is very divergent across the sector."

She said she expected listed property total returns to follow income growth as long as there were no "negative issues emerging in the bond market".

The performance of listed property tends to track the performance of long bonds because they are both income-generating investments.

The listed property sector reached a milestone last week in terms of total market capitalisation. For the first time, the sector?s total market capitalisation reached the R100bn mark.

This represents a massive increase on the R7bn market capitalisation of the sector in 2000.