Property sector remains safe haven for investors
ZIMBABWE'S property sector has remained a safe haven for value preservation for investors as various market investment options continue to be under threat from inflation, currency volatility and government policy interventions, according to analysts.
The real estate residential segment has seen increased development of modern housing patterns that are in line with global trends.
However, there has been limited corporate commercial development activity within the sector, with the market being affected by the unstable and depreciating local currency, with the majority of developments mainly in the industrial, retail warehousing sectors.
The Government on its part has been clear that it will continue to invest in infrastructure development, providing mainly supporting infrastructure such as roads, bridges and dams which will facilitate the private sector to embark on various housing projects.
“These projects somewhat reflect the lack of investment in our capital markets. So, in essence, our financial ecosystem is shallow, the fixed income market is as good as dead due to sub-inflation returns, and the stock market is tricky due to government intervention so capital ends up finding a safe haven in brick and mortar,” said Rufaro Hozheri, an investment analyst.
He said there has been high demand for houses, especially these newly built modern houses and official figures show that the country's housing deficit is circa 5 million units.
“That is why we have “agents in the market when looking for accommodation, if the shelter was in excess supply we wouldn't be having agents who charge exorbitant prices in the name of “agent fees,” he said.
According to Hozheri, rental yields for office space are on the low, around 5-6 percent per annum but for residential it can go as high as 10 percent and that market is almost fully dollarised.
“For a US$75 000 worth 2-bedroom apartment with US$400 monthly net rental, the payback period will be 15 years.
“Interesting enough, some of the institutions doing housing projects now prefer to rent out rather than outright sell the houses due to these high rental yields,” he said.
Enock Rukarwa, another investment analyst said owing to obtaining macroeconomic conditions around low income levels, inflationary pressures and limited capacity utilisation, demand for commercial real estate has remained hamstrung.
He said property market dynamics where supply is outstripping demand especially for CBD offices has kept space adoption at truncated levels.
“However, demand for retail and office segments predominantly residential has been bullish lately necessitating property companies to reconfigure business models towards this niche market,” he said.
Within the market, there are some projects that have been on sale for quite some time while others are holding on for speculative purposes. Analyst Batanai Matsika said there could be strategic reasons for holding which can be market timing or holding on for rental yields to firm. Economist Tinevimbo Shava said such situations are normal under inflationary periods as project developers seek to maintain value.
"Housing project sale has been on the slow side due to many factors chief among them high interest rates.
“With these rates even mortgages are expensive and people are finding it hard to pay them. Inflation has also halted the investment in property as prices in foreign currency are also going up.
“However, this will be a temporary setback for the sector as inflation starts to cool, interest rates will also fall,” Shava said.
Zimbabwe's property prices went down during 2020, at the height of the Covid19 pandemic when economic activity was restricted. However, the sector has made significant progress on recovery.