eBusiness Weekly
Michael Tome
Dawn Properties Limited registered a decline in its real estate business in the 9 months to September 2019, largely weighed down by a myriad of prevailing adverse macroeconomic conditions.
The Zimbabwe Stock Exchange (ZSE)- listed property firm, however, remains optimistic of posting growth this year driven by time-shares and an increase in rentals this December.
Dawn owns time shares at Troutbeck (Blue Swallow Lodges) in Nyanga) and Kingfisher Kingfisher Cabanas in Kariba. It also owns several hotels operated by African Sun including the Crown Plaza in Harare.
Dawn expects significant growth in contribution from leading hotels business and fellow ZSE-listed firm, African Sun, which leases the property firm’s hotel properties, and several other properties dotted around the country.
The group said property owners were reluctant to dispose of their properties given the erosion of local currency in 2019, after Government scrapped the multi-currency regime and reintroduced the Zimbabwe dollar.
Comparatively, rental income in local currency has plummeted significantly this year compared to returns Dawn used to get during the multi-currency era, a monetary system that was dominated by the US dollar.
The property firm’s fortunes have also suffered as a result of the majority of workers’ inability to afford rentals obtaining on the domestic market owing to low salaries, which are lagging behind high inflation levels.
The company performed better in the first six months of the year as the period was characterised by a macroeconomic environment with minimal foreign exchange premiums between the local unit and major currencies. A stronger US dollar, the dominant foreign currency in Zimbabwe, in the third quarter of this year resulted in foreign currency exchange rates sky-rocketing and extensively eroding the local currency in the process.
“During the period under review, the economy continued to be curtailed by inflationary pressures and acute shortages of foreign currency that have resulted in shortages of electricity and fuel. The net effect of this has been evident with the more pronounced erosion of household incomes, savings and purchasing power.
“Property sales transactions in the mono-currency regime have significantly decreased compared to the same period before promulgation of Statutory Instrument (SI) 142 of 2019 as most sellers are reluctant to put their properties on the market, citing local currency devaluation.
“Property yields have also decreased as rental rates that were being charged in hard currency before SI 142 of 2019 are beyond reach for the majority in local currency equivalence,” Dawn Properties said in the trading update.
Dawn Properties intends to roll out additional residential housing projects after launching the Marlborough Sunset Views; its second housing project in the Western parts of Marlborough.
The project entails the delivery of 354 stands with the first phase of 70 houses to be completed by December 2019. Selling of the stands is scheduled to start next month.
This comes on the back of an encouraging performance after Dawn Properties’ revenue in the period to September 2019 grew 138 percent to $15,2 million from $6,4 million realised in the prior comparable period.
The assets as at September 30, 2019 were $614 million, a one percent growth on the June 30, 2019 position of $610 million, and were also 520 percent higher than the $99 million at December 31, 2018.
Total operating expenses in the period under review were up 119 percent to $6,8 million from $3,1 million incurred for the six months ended June 30, 2019 attributable to the obtaining inflationary economic environment.
