Real estate recovery to take much longer

ZIMBABWE’S real estate sector could feel the longer term repercussions of the Covid-19 pandemic, analysts say.

Property firms are likely to take a medium-to-longterm hit as both residential and commercial tenants feel the impact of liquidity pressures as a result of the lockdowns.

“The widespread effects of the pandemic on commerce have rendered a further blow to the already subdued real estate market, which was characteristically affected by the volatility of the economy and fluctuating exchange control rates.

“Property sales have dwindled as businesses and individuals alike brace for protracted restrictive measures and the implementation of current and future contracts remains uncertain,” says Christabel Shava, Real Estate and Pro Bono Associate at Manokore Attorneys in an analysis.

“In the short-term, landlords are faced with decreased cash flow and ultimately making value judgements as they pertain to the retention of tenants.

“In the middle to long-term, landlords must account for decreased occupancy levels, deflation of the real estate market and subsequent downward review of rentals.”

Last month, the Zimbabwe National Chamber of Commerce (ZNCC) called for a downward review of commercial property rentals.

“There is need for engagement on rental negotiations whilst recognising the Privity of Contract. Through moral suasion, landlords should be encouraged to engage their tenants to negotiate for downward review of rentals to about 50 percent in this second quarter of 2020.

“These negotiations should only apply for commercial arrangements not residential,” said the business representative body.

With businesses already feeling the financial effects of the pandemic — which cascades to their employees — liquidity shortages have already become an issue for local property firms, if they had already not become an issue prior the onset of Covid-19.

In a move aimed at protecting both residential and commercial tenants, the Government announced that all rentals that were due for April can be paid in equal instalments, adding that there was a moratorium on evictions during the lockdown period.

The extended lockdown period is expected to end this Sunday. Analysts at Akribos Research Services concur with the dim prospects for the sector, but say the typical resilience of the sector should provide a silver lining in the long-term.

“The local property sector continues to face headwinds as local aggregate demand continues to deteriorate. As a result, we expect overall occupancy to fall in the short-term.

“In the first quarter of 2020 the sector continued to struggle with the prevailing economic conditions in the country as the decline in economic activity and disposable incomes negatively impacted occupancy levels,” said the analysts in a first quarter economic report.

“According to the Zimbabwe Infrastructure Investment Programme, demand remains high for residential properties with the national housing backlog estimated be around 1,3 million units. The City of Harare alone requires over 500 000 houses to meet demand.

“Historically, real estate investments have fluctuated during periods of economic crisis but, the overarching trend over time has been that more property space is required for the sector in the medium to long-term.”