eBusiness Weekly
Nelson Gahadza
The country’s property market continues to evolve for survival in response to the headwinds in the mainstream economy with the incessant macro-economic challenges having seen some subsectors failing to provide an automatic hedge against inflation.
Mashonaland Holdings in its financials for the year ended December 31 2022, said the market continues to witness marked disparities in the pricing of goods and services depending on the currency of settlement, with an increased number of transactions being settled in foreign currency.
“These market dynamics present cost-push pressures which require the group to continue to focus on increasing efficiencies while pursuing its portfolio diversification strategy,” said Engineer Grace Bema, the company’s chairperson in a statement of the financials.
She said the retail and sub-urban office park sectors have provided a safer bet in the past year while the CBD office sector has seen rental growth significantly lagging inflation.
“The ability to hedge, however, shifts between different sub sectors as economic conditions and structural factors come into play.
“While demand-driven inflation in the past has boded well for real estate in terms of hedging against inflation, supply side shocks such as the increase in food and oil prices are more difficult to hedge as tenants’ rent paying capacity is invariably impaired,” she said.
According to Mash Holdings, the occupier sub-market is expected to continue endearing itself with the informal sector through, among other measures, reconfiguration of low-rise buildings in the CBD into small to medium enterprise miniaturised retail facilities as demand for such facilities remains positive.
Demand for warehousing and purpose built industrial space as well as suburban offices has been steady though there is very limited potential of rental growth in real terms.
Bema said frequent rent reviews, indexation and charging of rentals in USD, as the economy continues to dollarise, are some of the measures the occupier sub-market has adopted in order to ensure inflation hedging.
“This attribute has attracted more investments towards specific pockets of the property market such as the small sub-urban retail sector as opposed to the traditional, large and capital intensive centrally located retail malls,” she said.
In the development sub-market, construction cost remains high mirroring the inflationary trends and high interest rates.
“However, capital values remain under pressure. As such, new developments for investment purposes remain under pressure for viability,” said Bema.
Mash Holdings is now majority owned by ZB Financial Holdings (ZBFH) following closure of an an offer to minority shareholders. The Group listed on the ZSE is engaged in property investment and development.
In terms of financial performance for the year under review, revenue increased by 98 percent to $3,8 billion compared to $1,9 billion in prior year mainly driven by revenue earned from the Mashview Gardens cluster housing development amounting to $1,2 billion, contributing 30 percent of revenue performance.
Rental income increased by 34 percent to $2,6 billion, despite the comparative period being longer following the change in financial year end in 2021, thereby also contributing to the improved revenue performance.
“The increase in rental income was driven in part by periodic rent reviews to align rentals with obtaining market conditions and also improved occupancy which grew from 81 percent in 2021 to 87 percent in December 2022,” said Bema.
The group recorded a profit for the year of $17,2 billion compared to a loss of $4,8 billion in the prior year due to improved operating profitability and 39 percent capital gain recorded on investments.
For the year under review, the group’s investment properties were valued at $68 billion, the valuation represents a 39 percent capital gain for the year.
Bema said the capital gain was achieved through the group’s periodic rent reviews to hedge against rising inflation as well as firming values for the Group’s strategically located land banks.
On new property investments and projects, the group acquired a four hectare site in Pomona for the development of a wholesale centre. Pre-construction phase works including design development, environmental impact assessment, building plan approvals and tendering are almost complete.
The group also acquired a two hectare site along Borrowdale Road for the development of an office park.
On the Mashview Gardens cluster housing development, construction works on the development are progressing in line with the construction programme and are set to be completed by August 2023.
At the Milton Park day hospital, construction works are progressing well. The group disposed of the Charter house during the year under review as part of its diversification strategy which entails reduction of CBD office exposure.
