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Zim’s property sector faces viability challenges

Demand in real estate products increases with increasing economic activity, and vice versa. File pic

PROPERTY industry experts believe that Zimbabwe has a unique context it can leverage on to beat the global  headwinds posing risks to the property market.

Should the country be able to stabilise the economy, Standardbusiness understands that it has an opportunity to meet a significant portion of its property market and requisite infrastructure needs using appropriately priced local resources.

The global property market continues into 2024 on highly uncertain terms, with the traditional and predictable property cycles in mature markets having been distorted largely by the enduring effects of the pandemic, lagged effects of monetary policy tightening, geopolitical instability, and election uncertainty in major economies.

Demand in real estate products increases with increasing economic activity, and vice versa.

Given the factors obtaining on the global market, this implies a negative bearing on the global macroeconomic environment as the property market has been facing fundamental challenges.

Mashonaland Holdings managing director Gibson Mapfidza told  Standardbusiness that the country faces a very unique scenario as economic players believe most of the macroeconomic factors are caused by lack of trust.

Mapfidza said the rapid devaluation of the local currency has been the major theme investors are responding to.

As such, the property market continues to experience a significant increase in investment by institutional investors as high inflation, flight to safe haven, political uncertainty and the scarcity of investment opportunities explain this phenomenon.

“This has helped prolong the high prices, especially for residential properties and strategically located undeveloped land,” he said. 

“The bubble, however, will burst at some point resulting in far reaching investment losses.

“As the property market is loosely regulated if at all it is, there are fears that there could be an oversupply of especially cluster houses. 

“With increasing construction costs due to the rapid inflation and elevated interest rates, viability issues will remain a key risk going forward.”

Mapfidza added that, while the post pandemic back-to-office rates have been gradually increasing in the developed world, the office will remain central to organisations’ work ecosystem in Africa and specifically Zimbabwe due to the poor information and communication technology connectivity and unreliable power supplies.

There is need, however, to reconfigure the office spaces to encourage and shift from a functional workspace to a collaborative hub that fosters culture, social connections, and employee well-being.

“Zimbabwe, traditionally, had a functional capital market anchored by a culture of saving mainly through the pension funds and insurance industry, and banks playing the intermediary role,” Mapfidza said. 

“Assuming that the authorities can stabilise the macroeconomic environment, which with discipline can be achieved, Zimbabwe has the opportunity to meet a significant portion of its property market and requisite infrastructure needs using appropriately priced local resources. 

“This will mean as the country waits for the global economy to stabilise and correct interest rates, it can rely on local resources to rebuild.”

As Zimbabwe’s population continue to grow and urbanism takes root, Mapfidza said the country, like the continent at large, is abound with infrastructure development needs to cater for the growing population.

He said Zimbabwe had huge infrastructure gaps with compelling investment potential and the housing waiting list indicated that affordable housing and its associated bulk infrastructure supply is a potential investment.

Global inflation, as central banks across the globe seek to tame inflation through aggressive monetary tightening, has seen interest rates going up.

With the fight against inflation seemingly won, it is widely expected that the policy rates will remain elevated for the first half of 2024.

Mapfidza said these developments in the developed economies have a key bearing on developing countries as most capital formation emanates from the developed world.

Denford Chatendeuka, a lawyer and property developer, told Standardbusiness that there was  a two sided effect of global risks on the  Zimbabwean market  and  final effect largely depended on how policy makers and players behave.

“The Zimbabwe property landscape has a unique context that can be leveraged on,” Chatendeuka said.

“Firstly, the decades of a drag in significant supply of housing stock versus population growth means there is a huge supply gap of housing. 

“Secondly, the growth of the Zimbabwe diaspora population with an appetite for acquiring, developing and investing back home means we have a growth in effective demand.”

He said the third context is that the pre-colonial inspired land tenure system has not been reviewed in a long time, meaning  the freehold titled land  has had a significant demand pressures as investors prefer security on their investment.

“Now given the above context, its clear that policy makers have it in their hands how the global dynamics play out in Zimbabwe,” Chatendeuka  added. 

“Firstly, supply side of freehold titled land can be increased by changing peri urban areas tenure systems from communal to freehold tenure, coupled with futuristic town planning.

“Certainty on currency issues can open up local and diaspora mortgage products.

“The effect of global trends if we get it right as highlighted means activity can move in the right direction.”

However,  Chatendeuka said real estate  in Zimbabwe tends to be localised and as such, the local dynamics are more likely to shape  how 2024 pans out.

He  said  the country needed to  work on policy  issues and  sanitise  the noise and negative perceptions around property ownership.

“A deliberate and intentional brand packaging of Zimbabwe as a whole in general and in Zimbabwean  real estate  in particular will do go a long way to drive attention to our market,” Chatendeuka  said. 

“Dubai is an easy reference on how an intentional, deliberate brand packaging coupled with a supportive ownership system can drive attention to a nation’s real estate.”

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