The country’s property sector has remained largely stagnant in recent months owing to liquidity challenges amongst a host of other factors.
NewsDay Business Reporter Victoria Mtomba (ND) spoke to Estate Agents’ Council of Zimbabwe chairperson Oswald Nyakunika (ON) about developments in the sector in the first half of the year.
ND: How would you describe the performance of the property sector in the first six months of the year?
ON: The current economic crisis is biting on all sectors of the economy. The crisis of confidence remains and with it we have experienced serious credit crunch and cash crisis. Many businesses are closing down and many industries are operating below capacity.
The property sector has not been spared. The majority sales are now by deed of sale or installments. There is no money for developments or refurbishment as the economy battles to come out of this cash crisis.
ND: What were the major challenges that the sector faced in the first six months of the year?
ON: Businesses are struggling when it comes to rental payments or property purchases. With certain businesses it is now necessary to link rental payments to turnover. This was done in America during the Great Depression.
ND: How severe is the challenge of default repayments by borrowers?
- Chamisa under fire over US$120K donation
- Mavhunga puts DeMbare into Chibuku quarterfinals
- Pension funds bet on Cabora Bassa oilfields
- Councils defy govt fire tender directive
Keep Reading
ON: I think the banks are being conservative with their problems. Many banks are seriously exposed not just to each other but to many borrowers/defaulters, such that Reserve Bank of Zimbabwe is worried about one bank collapsing and its ripple effect on many banks and industries.
The ripple effect would be enormous. We have already seen a number of property auctions and I fear the numbers will increase as we go into the last quarter.
ND: What’s your comment on the $7 million credit line recently availed by BancABC acquired from Shelter Afrique to provide housing for people on a ten-year basis?
ON: For a start the money is not coming from local savings/investment, but donations/ allocations from outside. This is not sustainable. You need a revolving fund.
Most of what is being disbursed is wiped quickly and a good example is what has been happening with Old Mutual. The $7 million can only buy 20 houses in Harare. It is therefore insignificant relative to demand.
ND: How did the residential and commercial sectors perform in the first half of this year?
ON: Dismal when you look from all angles like rentals or sales. Prices and rentals continue to drop or remain static. Many industries and shops are closing down.
There is need for capital injection and this is very unlikely given the current crisis of confidence. Having said that, investment in property remains a good hedge in these turbulent times.
ND: What are your projections for the mortgage, residential and commercial sectors of the economy in the second half of the year?
ON: There are very few savings in the economy, money market, insurance, pensions and equity market. That is a pool of savings necessary for lending purposes.
The current confidence crisis had emptied those savings resulting in the current credit crunch and cash crisis. People have their money deposited into their accounts and withdraw it the following day.
ND: What do you think will be the major drivers of the property sector in the second half of the year?
ON: The demand for shelter remains high and individuals will continue to built. All that is required is servicing of stands by councils or local government in conjunction with private sector. Zimre has done that in Parklands Bulawayo and Rhodene Masvingo.
Infrastructural development by the government using borrowed funds or donor funds will be major driving force in property and industrial development.
The government must come up with projects that put money in the hands of the people or individuals.
This will be good spending power necessary for any economy to grow and come out of the current depression.
