Listed property as an investment class was a credible alternative to long bonds, said Dirk De Vynck, the editor of Rode's Report on the South African Property Market.

De Vynck said these conclusions stemmed from Rode's analysis of the market rating of property unit trusts, expressed as the income/dividend yield over
the last 17 years, which showed that this asset class was cheap at present.

Possible reasons for the recent weaker performance of these unit trusts relative to bonds could include a growing demand for South African bonds, growing market belief in the possibility of lower inflation and the government's strict fiscal policy, which was positive for the lowering or strengthening of bond yields.

On the other hand the comparison of listed and directly held property in the third quarter this year showed that the value gap between the two was now about 4 percent now compared with 18 percent in the first quarter and 7 percent in the second quarter this year.

'This means that property unit trusts are trading at a discount of only about 4 percent to directly held property. The narrowing of the value gap is a move in the right direction, and improves the possibility of more directly held property coming to the listed property market,' he said.

The latest Rode survey of office rentals in the country's major central business districts revealed there were tentative signs of a recovery.

This improvement was evident in the performance of nominal rentals, which had accelerated in the past three quarters after minor growth for two years.