The property market improved moderately in the first half of the year, according to the SA Biannual Property Indicator released on Tuesday.

"Property investment overall delivered a total return of 5.9 percent, which comprised 1.5 percent capital growth and a 4.4 percent income return for the first six months of the year," said the Investment Property Databank (IPD) and the SA Property Owners Association (Sapoa) in a joint statement.

Property investors saw returns diminishing as operating costs outstripped income growth, the indicator showed.

Electricity costs made up one-third of the total operating cost bill, with a monthly average of R12.80 per square metre.

Rates and taxes constituted a further 20 percent of the total.

Tenants paid around three-quarters of the total costs.

Office vacancy rates increased from 12.1 percent in December to 15 percent in June.

Rentals grew just 0.1 percent in this sector.

Offices in inner city and provincial nodes were the hardest hit, with rental levels declining.

But gains were evident in the retail and industrial sectors.

Retail property returned the top capital growth rates at 1.7 percent, along with solid 3.7 percent rental growth and strengthening occupancy rates.

"Vacancies in the sector improved from six percent to 5.7 percent over the first half of the year," said Stan Garrun, head of IPD.

The industrial property sector recorded positive rental growth at 4.2 percent, with vacancies declining from 4.3 percent to 4.1 percent.

Six months ago, the IPD's 2011 results showed 10.4 percent annual returns in property investments overall, with a slight uptick in the second half of the year that suggested a possible recovery.

At the same time, vacancies had increased to 6.9 percent, rental growth had declined to 6.2 percent and yields weakened by 36 basis points, to 9.6 percent.

"Although returns for the first half of 2012 are better than 2011, the results show a fairly muted picture of performance," said Garrun.

"We are still not seeing any substantial recovery."