Foreign currency transactions save property sector

STATUTORY Instrument 85 of 2020, which allowed for the use of foreign currency for local transactions, ushered some relief for the real estate sector sub markets.

In a trading update for the first quarter to December 31, 2020, Mashonaland Holdings managing director, Gibson Mapfidza, said the freehold sales sub-market experienced the most notable activity mainly concentrated in the residential sector as a result.

“Statutory Instrument 85 of 2020, which had been put in place earlier, allowed sellers and service providers to freely market their goods and services and transact in the USD currency.

“In the occupier sub-market most tenants were able to pay-up the rent arrears that were deferred during the lockdown period.

“This propelled the sub-market, which had earlier in the year suffered lethargic rental growth and rent payment deferments. Inflation, however, remained significantly high and, as such, the asset class failed to hedge against time value losses,” he said.

Overall, the property market fundamentals have remained depressed due to the challenging macro-economic climate and low business confidence.

“The occupier sub-market was affected by low demand for office space, this in turn had an impact on development activity. The limited development activity and sales transactions on the market have remained concentrated in the residential sector,” said Mapfidza.

During the quarter under review, rental income increased by 47, 6 percent compared to the same period last year driven by quarterly rent reviews, which the business has been performing in line with market practice.

Mapfidza attributed the improved revenue performance to new leases concluded during the quarter.

Occupancy levels increased to 79,4 percent from 77,7 percent.

The group’s operating profit increased by 18,9 percent due to the revenue growth but operating profit margin fell by 19,5 percent due to an increase in total operating expenses. During the period under review, operating expenses increased by 59 percent to $30,7 million driven by movement in unofficial market exchange rates, which had a bearing on the Zimbabwe dollar value of materials and services consumed by the company.

Said Mapfidza: “Service providers have continued tracking premium exchange rates in the pricing of products and services to hedge against inflation.”

The property investment portfolio value remained at an inflation adjusted valuation of $10 billion determined from the last valuation performed as at September 30, 2020.

Going forward, management says the property concern will continue to preserve value by pursuing its property development projects in line with the broader company strategy while continuing with efforts to retain existing tenants and secure new leases to sustain overall business performance.