eBusiness Weekly
Business Writer
Zimbabwe’s real estate landscape presents an opportunity to expand housing options, driven by the national housing deficit and continued demand for accommodation among average citizens, according to a new report by Knight Frank Zimbabwe.
Despite lack of affordable and long-term mortgages, some Zimbabweans are still building homes themselves, from low-income areas all the way to affluent suburbs.
Private developers are driving a boom in Zimbabwe’s housing market, with several suburbs experiencing significant progress.
For instance, in Marlborough, Sunridge, and Greencroft, over 59 three-bedroom units have already been completed, with construction underway for another 30. Meanwhile, Meyrick Park, Greendale, and Newlands boast over 100 completed two-and three-bedroom units as of December 2023.
Financial institutions and corporates are major contributors to residential property market, having delivered over 400 units ranging from two-bedroom to three-bedroom configurations across both low-density and high-density suburbs nationwide.
While this represents progress, it is a drop in the bucket compared to the staggering national housing deficit of about 1,25 million, according to official statistics.
Individuals, especially those in the informal sector, have also been actively participating in housing construction, often through self-funded projects. While on a smaller scale, the Government remains a player in housing delivery through various initiatives.
“Overall, the residential rental market demonstrates resilience, characterised by sustained demand outpacing supply,” revealed the Knight Frank report released last week.
“The demand for accommodation among the average citizen, coupled with the prevailing national housing deficit, presents a significant opportunity to expand and introduce new space supplies into the property market,” the report added.
The extension of the multi-currency regime till 2030 has further bolstered optimism, the report says. The policy injects confidence into the business community, allowing for more extended planning horizons. This stability, coupled with the aforementioned factors, creates a fertile ground for the real estate sector to flourish.
The potential impact of the recently introduced structured currency, ZiG, remains to be seen but some observers say it is likely to be huge.
Some financial analysts believe its success could provide further impetus to housing development, particularly if it facilitates easier access to mortgages.
The report also highlights a surge in upscale cluster home developments, particularly in the capital, Harare. However, their affordability remains out of reach for most Zimbabweans, raising concerns about the long-term viability of these projects.
The new cluster developments predominantly available for sale in Zimbabwe span a range of prices.
Units in high-density suburbs typically range from US$60 000 to US$80 000 per unit. At the same time, those in middle-density areas command higher prices, ranging from US$140 000 to US$250 000 per unit.
Moreover, luxury villa developments like Millenium Heights, 9onDart, and Cyber City are emerging, with many sold off-plan. Prices for these luxury properties can reach as high as US$500 000, reflecting the growing demand for upscale living options in the market.
Investment options
With local investment options ravaged by currency volatility and a decline in confidence, real estate has emerged as the most favoured asset class, attracting investment from both individuals and corporations.
The past two decades have seen a significant blow to Zimbabwean retirement security.
Wiped-out savings due to hyperinflation in 2008 and currency fluctuations in 2019 have left many formally employed workers disillusioned with traditional investment and savings options.
This has fuelled a surge in real estate investment as individuals seek a more tangible asset class that offers the potential for rental income and capital appreciation, providing a source of income after leaving the workforce.
Furthermore, with the anticipated economic recovery, employment is expected to rise, leading to a firmer demand for accommodation.
This confluence of factors – a shift in investment preference and growing tenant demand – positions the Zimbabwean property market for potential significant growth. In addition, a stronger economy is likely to create better quality jobs and higher earnings, further fuelling the expansion of the property sector as more people can afford to buy or rent.
However, some real estate analysts believe a significant boost to housing development and a potential narrowing of the national housing deficit could be achieved if the financial sector offered innovative products tailored to the informal sector.
According to a recent report by Integrated Properties, Zimbabwe’s vibrant informal sector could become a key driver of homeownership if financial institutions open doors to them by easing mortgage requirements and offering longer loan terms.
Formal mortgage options have traditionally been limited, leaving many, particularly those in the informal sector, unable to achieve their dream of homeownership.
In 2023, only 8,85 percent of total credit in Zimbabwe went towards formal mortgages, according to official statistics from the Reserve Bank of Zimbabwe (RBZ).
The figure highlights a crucial bottleneck; high-interest rates averaging 12 percent per annum and short loan terms making homeownership a distant dream for many.
Banks, cautious due to perceived risks, further tighten with restrictive lending practices.
In addition, limited deposit mobilisation leaves the banks with less capital for mortgages, while a dearth of affordable housing options and stagnant property values restrict choices for potential home buyers and erode collateral value for lenders.
Zimbabwe’s informal sector is estimated to significantly contribute to the gross domestic product, providing jobs to millions. Despite their economic contribution, many in this sector lack access to formal financial services, including mortgages.
