Real estate requires critical policy interventions
IT is often said that the future cannot be discussed without reference to the past, trends and traditions. The past and the future are intrinsically intertwined.
To leap into the future, the nexus between them should be clearly understood without any ambiguity for the past provides the present with the necessary context to understand decisions and actions being made right now.
Lessons from the past also provide invaluable insight into the big global challenges of today’s world — whether it is trade wars, financial crises, migration pressures, climate change or extreme political uncertainty — and be able to break these down and relate these to the domestic environment.
With the Covid-19 pandemic knocking down everything in its wake and the second wave being more vicious than the one before it, it has never been more important to crystallise future needs even though it cannot be done with the precision of a Jewish carpenter.
We will take you through the year 2020 in retrospect, signposting events that impacted on the country’s economy, for better or worse.
In so doing, we cannot ignore the interventions made by the authorities in trying to influence the course of events and how the market responded to them.
An attempt will also be made to hazard a few, modest ideas that may enrich the already existing body of knowledge as we all seek to contribute to the transformation of our nation into an upper-middle class economy by 2030.
What emerges prominently in the outlook period is that deliberate market responses and policy interventions would be of necessity in charting a brighter future for the real estate sector, especially. Of course, the report also looked into the crystal ball to see what the coming year has in store for us, obviously informed by the past, trends and traditions.
The sector in retrospect
The sector was subdued for the greater part of the year with activities largely overshadowed by the Covid-19 pandemic. The property market evolved in the process and investor priorities and focus were recalibrated as the pandemic accelerated ecommerce, leading to the emergence of virtual platforms.
In the process, the new operating environment unravelled the resilience of the residential and industrial sectors and opened unending opportunities for savvy participants.
With the Covid-19 pandemic encouraging staff to work remotely, the market was characterised by space surrenders with landlords losing their bargaining power as tenants negotiated rentals downwards thereby lowering returns on properties.
Invariably, this impacted on property capital values. For listed entities in the construction sector, trade was subdued for the better part of the year, but fortunes changed as volumes increased around the middle of the third quarter to end of year, as demand for their product and services improved.
With no major noticeable construction projects beyond the dualisation, upgrading and tolling of the Harare to Beitbridge highway at a cost of US$2,7 billion, the construction of the New Parliament building in Mt Hampden and the expansion of the Robert Gabriel Mugabe International Airport in the capital, it became quite apparent that the development of houses in most, if not all cities, towns and growth points drove volumes up during the review period.
It was not surprising therefore that brick manufacturing companies kept emerging to meet the demand for their products. Cement manufacturers also smiled all the way to the bank.
Occupant levels remained low in the rental market, with empty spaces being a perennial migraine for property owners in both the residential and commercial space.
There was migration of tenants from leafy suburbs to landing suburbs, as they adjusted to making the final move to lower ranking suburbs, as the Covid-19 pandemic dealt a heavy blow on incomes.
Prime retail rents for commercial retail remained relatively stable at around US$12–US$15 per square metres per month, while yields were stable at approximately 6%-7%.
It was announced during the 2021 budget presentation that of the productive loans advanced, only 2,21% and 0,4% were directed towards mortgages and construction respectively, an unfortunate scenario for the real estate sector.
This in a way confirms the assumed position that most purchases are cash transactions. The mortgage market is dying and its resuscitation is underpinned by currency stability.