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Analysis: Property market boon for individuals as inflation soars

Corporate and individual investors in the property sector are beginning to cash in as the sector redollarises to preserve value. A snap survey by Econometer Global Capital shows that most property owners in Harare and other major cities and towns are now cashing in rental income in United States dollars. In Campus towns like Gweru, Chinhoyi and Bindura, that has also become the trend. Property owners cite rising inflation for this development saying a stable currency will also maintain the value of their properties. According to a report by Zimreal Property, rental fees in Zimbabwe’s volatile property market have shot up by 80 percent over the past six months while other property owners demand rentals in United States dollars. With annual inflation for April standing at 77 percent, returns on the Zimbabwe Stock Exchange remain depressed compared to the property market which also has arbitrage opportunities when rentals are  charged in the greenback.

In the pre-dollarisation era (before 2009) the main buyers of real estate property in Zimbabwe were those in the diaspora and a few locals who had access to the USD (United States Dollar) as the local properties had become relatively cheap in real terms.After dollarisation (post 2009) the diaspora market suddenly crumbled as local properties became expensive in real terms. The high prices of property coupled with the liquidity crunch saw the market turn into a buyer`s market. The entry level price for a small property basic four roomed core house in high density suburbs like Highfileds, Budiriro and Kuwadzana is approximately US$25 000 (R353500). In medium density areas like Waterfalls, Bloomingdale, Waterfalls and New Marlborough, the entry level is approximately US$80 000 (R1.31 million) for a two bedroom, apartment or basic house. In low density areas in the northern suburbs, the entry value is US$130 000 (R1.83 million) to acquire a two bedroom garden flat. According to the world population review the city of Harare accommodates over 1,5million thus excluding surrounding towns such as Chitungwiza which has over three hundred thousand yet little development has been done in the capital to sustain these numbers.

Experts state rural to urban migration in search of employment prospects, as one of the reasons why Harare’s population has ballooned since Independence in 1980. Is inflation continues to haunt the economy, the Zimbabwe Stock Exchange (ZSE), a once go-to destination for companies seeking to raise cheap
funding, is planning to overhaul its trading platform by introducing several new investment alternatives due to worsening economic conditions. ZSE chief executive officer, Justin Bgoni was recently quoted in local press saying the local bourse, which has an equities and debt platform, was at different levels of negotiations with authorities and stakeholders to establish the Real Estate Investment Trusts (REITS), exchange traded funds (ETF), multicurrency trading platform, participatory bonds, dual and cross listing and increased equity listings from different sectors. However this has not been the case for office space in
towns and cities. Zimbabwe is suffering from economic and liquidity challenges which have stagnated office market activity. Supply is higher than demand and tenants are voluntarily surrendering space. Market players say office buildings in the Harare CBD have void rates in excess of 50%, making them unattractive investments. Suburban offices have become more sought-after investments, due to their lower void rates, but there continues to be few sales transactions. To reduce vacancy levels, some CBD landlords are converting office space to shops, while others are partitioning floors into smaller suites. Given the challenging
market, no new multi-storey buildings have been constructed in the last twenty years.

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