Property loan stock company Vukile Property Fund said yesterday it was expecting a “reasonable” increase in distributions for the year to March and that it could even be slightly higher than originally anticipated.

In a newsletter to shareholders, CEO Gerhard van Zyl said there were signs that trading conditions had “improved somewhat”.

But the picture is not all that rosy for the property market yet. Van Zyl said vacancies had increased but were still within acceptable limits.

Bad debts had been contained within budget and “although we are seeing a slight slowdown in rental collections, this is still within our prediction framework”.

The group had been able to renew rentals at rates higher, on average, than the expiry rentals.

“Our recurring cost to gross income ratio has … increased and will probably continue to do so as a result of the increases in energy costs and rates and taxes.”

Vukile’s retail portfolio performed above expectations, Van Zyl said, recording an increase in turnover for most of its centres for December last year compared to December 2008.

Van Zyl said the company did not expect a substantial or sustained improvement in trading conditions before at least the second half of this year.

But there were indications that economic activity was picking up and the company was “cautiously optimistic that we have probably turned the corner and that business conditions should slowly start to improve”.