"The likelihood of supply picking up soon is not very great - we haven't had anything like the level of construction as in the Eighties."
One reason to invest in property is to reduce your risk through diversification. For an investor who owns a range of mainly equity investments, a property portfolio can provide a useful spread, say independent financial advisers the David Aaron Partnership.
"You are getting better yields on property than on equities or government securities," says their Michael Aaron. At present, property yields are under 7 per cent compared to the yield on the long Government bond of around 5 per cent.
"People haven't really looked at the property market for a long while," says Paul Talbot, of Portfolio Fund Management. "But with the equity market having risen to the level it has - and the gilt market has also had a phenomenal rise - property is a good alternative and defensive investment in that environment," he says. "And that does give an opportunity for long-term capital growth."
Collective investments such as unit trusts offer the best route. One of the problems with property unit trusts has been doubts about their liquidity. While a unit trust investing in quoted shares could swiftly sell its assets on the open market if it had to, a property unit trust would have real problems in the event of a sell-off by unit holders. Property cannot be sold quickly. This is why authorised property unit trusts have to hold at least 20 per cent of their assets liquid, usually in property shares.
But Portfolio Property Fund, launched in June, has an added safeguard. Its parent company, property company Liberty International, has guaranteed to buy up to pounds 5m of units a month for up to five months, if needed.
Tim Cockerill, of independent financial advisers Whitechurch Securities, recommends Norwich Property unit trust. It is the largest property unit trust, with assets of pounds 250m, and was launched nearly eight years ago.
Of property bonds on offer, Michael Aaron recommends investing in Allied Dunbar's. "They are one of the longer established ones, and yield just over 8 per cent," he says.
Property shares are another matter. Some analysts believe the sector is too volatile for the smaller investor. But Adrian Elwood, property specialist at stockbrokers Sutherlands, says many private stockmarket investors favour the sector, partly because they feel they know about property through owning a house.
But Roy Kaitcer of stockbrokers Brewin Dolphin says: "Generally speaking, property shares have been quite disappointing, bearing in mind current low interest rates."
Mr Elwood says: "Property shares underperformed dramatically at the end of last year. There were bargains around; now that is less the case but you can still get very good value." He sees greatest potential in medium-sized property companies, with pounds 200m to pounds 400m market capitalisation.
Derwent Valley, which owns offices in London's West End and retail and restaurant properties, is attractive and reasonably priced, as are the shares of Capital & Regional, which owns secondary shopping centres, says Mr Elwood.
But you could leave stockpicking to the professionals and opt for an investment trust. TR Property investment trust, run by Henderson Investors, trades at a 17 per cent discount to net asset value. Wigmore Property, which specialises in small to medium-sized companies, is smaller and trades at a 24 per cent discount.
The property sector is buzzing with mergers and acquisitions, which means the smaller end of the market appears the best place to be. "There are still far too many small companies," says John Hammond.
David Aaron Partnership (01908 281544) publishes a `Commercial Property Guide', free for Independent readers apart from pounds 2 p&p.
Property Portfolio Fund: 0171 588 8890; Henderson Investors: 0171-638 5757; Sutherlands: 0171-628 2030