Property prices anticipated to remain high

HARARE - Prices in the property sector are anticipated to remain high going into 2019 compared to regional peers, on the back of inflationary pressures, a local research firm has said.

Old Mutual Securities (Omsec) said going into the New Year, the property sector was set to see higher prices compared to regional peers on the back of high costs of building materials for new developments.

“The short-term should prove difficult for property companies but improved economic activity in the medium to long-term should benefit the sector.

“We maintain that comparatively higher financing costs as well as the high cost of building materials for new property developments will see property prices remaining high when compared to regional peers,” the analysts at Omsec said.

The country’s inflation firmed 10,16 percentage points in November to settle at 31,01 percent, against currency uncertainty which has forced most investors to hedge in the property sector.

Towards close of the third quarter, the country was hit by a cement shortage, leaving the construction industry stranded, while in some instances resorting to the black market. This, according to industry insiders, also pushed the cost of inputs in the construction industry.

Meanwhile, IH Securities (IH), another research firm, recently predicted property counters on the Zimbabwe Stock Exchange (ZSE) will remain under pressure as voids continue to surge in the sector driven by weak economic fundamentals.

According to IH, the ZSE’s property counters — First Mutual Properties, Mashonaland Holdings, Dawn Properties and Zimre Property Investments — had also seen softening demand on the back of a growing informal sector with little use for commercial properties.

“While demand for office rental space in the CBD weakens, demand for retail space remains relatively strong in both the CBD and suburban areas. However overall we anticipate occupancies will continue to remain under pressure with limited scope for rental increases,” the analysts at IH said in an equity strategy paper.

Property companies continue to see low demand for space on the market as companies have very few quality tenants.

“This has turned property companies into price-takers as quality tenants influence their own terms. The growing informal sector poses a risk to the sector as people move away from renting large office spaces and opt for ‘mobile’ offices,” IH said.

First Mutual Property chairperson Elisha Moyo, is on record pointing out that despite Zimbabwe’s improving business confidence and economic fundamentals, demand for space has remained subdued with occupancies in the property sector flat.

“Despite the improving economic fundamentals, strong Gross Domestic Product (GDP) growth is still required to significantly increase effective demand for space.

“The socio-economic dynamics of the economy are seeing property investors adapt the product offering, to meet the needs of the informal sector,” he said in a statement appending the realtor’s first half results.


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