eBusiness Weekly
Nelson Gahadza
Zimbabwe’s property market remains affected by slow space uptake, particularly impacting office space in the central business districts (CBDs) due to low economic activity in the formal sectors of the economy.
According to a real estate sector report for August 2023 by securities firm, IH Securities, among other macroeconomic pressures, the property sector remains affected by distortions in exchange rates and inflationary measures.
“As a result, most property owners are engaging tenants with a view to converting Zimbabwean-dominated leases to United States Dollars to enable value preservation.
“Also, due to continued disparities between official and alternative exchange rates, suppliers practice forward pricing, leading to significant cost pressures for businesses,” reads part of the report.
The firm said mortgage finance in the market is scarce, with most building societies reluctant to lend for more than three or five years, even to blue-chip clients.
IH said Zimbabwe Dollar mortgages attract 100 percent or more annual interest on a 25 percent deposit required to secure the loan, while loans issued in US Dollars usually come with front costs of up to 3 percent and annual interest rates of 10–12 percent.
According to the report, of the 34 percent homeowners surveyed, in urban areas, about 21 percent had title deeds to their property and 13 percent did not have title deeds.
“This just points to the bottlenecks that exist in the acquisition of title deeds by homeowners in the country. This in turn has implications for the homeowners’ credit worthiness and access to capital,” it said.
According to the report, Harare had the highest proportion of households without title deeds at 21 percent, which could be attributed to the fact that it houses the most people among the 10 provinces.
“Although there are housing shortages in the country, the residential sector is the best-performing real estate sector in Zimbabwe,” reads the report.
The report noted that Zimbabweans continue to face acute shortages of affordable housing options.
At least half of the people living in urban areas of the country live in rented accommodation, according to the 2023 Zimbabwe Vulnerability Assessment Committee (ZimVac) report.
Rented housing is an economic survival strategy, especially for those who cannot afford their own homes.
In its report, IH said that while office demand from big corporations has been falling, demand from SMEs is growing.
CBD property owners have been repurposing their buildings to accommodate small and medium-sized enterprises; consequently, vacancy rates have remained high because demand for space is smaller.
In the retail space, despite the low consumer disposable incomes in Zimbabwe, informal traders have caused a boom in the retail market, and vendors are flooding the CBD to maximize on the high volumes of traffic.
According to Knight Frank Zimbabwe, rental rates for retail spaces in the CBD range from US$20,00 to US$25,00 per square meter due to increased demand.
Rental rates for suburban locations have generally remained stagnant at around US$15,00 to US$20,00 per square meter.
“In recent times, there has been a surge in “maRunners,” who sell clothes, consumables, and other niche items at a discounted price to drive out higher volumes. These retail traders have driven the demand for space in the CBD,” IH said.
In industrial real estate, the manufacturing sector in Zimbabwe continues to face competition from imported goods, so storage, distribution, and logistics for the imported goods have become predominant uses of space.
IH said there is currently a short supply of industrial space, leaving demand unfulfilled.
According to a report by Knight Frank, private players and corporations have made significant investments in this sector to increase the supply of space in new industrial developments in Mount Hampden, Msasa, Madokero Business Park, and Pomona Industrial Parks, which have become major economic zones.
However, IH noted that power outages, poor water supply, low capacity utilisation, and deteriorating infrastructure have been slowing the growth of the industrial real estate sector.
Rental rates have remained stable at around US$3,00 per square meter per month for units up to 1000 square meters, while larger spaces are achieving in excess of US$1,00 per square meter.
