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Thursday, March 28, 2024
HomeBusinessTurbulent Economic Winds Hit Hard On Real Estate Sector

Turbulent Economic Winds Hit Hard On Real Estate Sector

Currency devaluation and a slowdown in the economy spelt negative fortunes for the real estate sector during the first six months of 2019 as real terms value from rentals depreciated while sellers withdrew properties from the market, the Zimbabwe Real Estate Review Report for first half of 2019 reveals.

Zimbabwe ended the 10 year multi-currency system early this year, and the re-introduction of the local currency which has been crumbling since establishment has weighed down heavily on the sector.

“The current downturn has seen depressed rentals across the market alongside weakening demand for space, reduced sales activity and downscaling by tenants. Rentals in the first half of 2019 were pegged in USD$ until foreign currency was deemed illegal tender,” read the report.

Rentals have therefore gone up by as much as 150 percent and some by as low as 20 percent while some have remained unchanged on case by case basis.

The report noted that frequent rent reviews are expected going forward as property managers try to match their multi currency rental levels and also try to keep pace with inflation.

Inflation is currently hovering beyond 500 percent, various economists says, since government stopped release of official figures.

Due to the ongoing power cuts, there have been voids in industrial space as companies close shop due to lack of productivity. This is however expected to continue as there have not been meaningful improvements on the power supply, analysts warn.

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On residential space, the report noted buyers with foreign currency have assumed bargaining power thereby managing to lower sellers’ asking prices.

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On mortgage financing, the sector has seen an improvement in loans advancement.

“Mortgage related financing has grown from the 4 percent in 2013 to 19.54 percent of total loans by June 2019,” read the report.

The nominal growth in mortgage financing was however mainly driven by foreign denominated loans which were translated at a higher rate at the end of the period.

On the supply side there is a need to replace, renovate and or upgrade the old and obsolete stock in the market, but this all depends on the effective demand for the properties.

Analysts however say the sector is a long way to go before it bounces back to strength as macro-economic indicator paint a gloomy outlook by close of year.

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