Listed property firms depressed

HARARE - The weak performance of property firms listed on the Zimbabwe Stock Exchange (ZSE) continues as high prices, debt and a tougher operating environment deters investment, analysts said.

According to stock broking firm IH Group (IHG), the sector’s year-on-year to June 2014 contribution to the local bourse’s turnover went down 15,41 percent while it shed 16,6 percent year-to-date.

Lloyd Mlotshwa, the group’s head of sales, said “property companies continue to see low demand for space on the market, increased evictions and higher arrears, whilst operating expenses remain high.”

He said the poor performance of the property market now requires implementation of “constructive policy shifts in order to become a competitive destination for investment into key sectors that can reinvigorate economic growth”.

Unlisted property firms are also struggling as demand for space is reduced due to company closures.

Going forward, Mlotshwa said “we foresee downward pressure on both rental rates and occupancy rates”.

He said the slowdown in the property sector and investments has resulted in a growing appetite for alternative investments in equities and fixed income, resulting in oversupply in certain property segments like office space.

He said the downward pressure on valuations is projected to continue as “the tenure and cost of financing remains highly-restrictive for a population that remains largely unemployed”.

“This combined with generally poor liquidity in the environment places a natural ceiling on property prices; declining tenant performance and lower rental yields,” Mlotshwa noted.

He said in the current environment, the cost of financing property development is likely to be high relative to the returns being achieved.

“… (With) weaker aggregate demand for space, this will inevitably have a strong correlation with the country’s economic growth, which for now is stagnant,” he said.

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