LEADING property firm, Bard Real Estate (BRE), says the prevailing harsh economic situation in the country has ravaged the property sector, which last year registered reduced yields as a result of increased vacancy rates and falling rentals.
In its property market report for 2015, Bard expressed grave concern at the continued economic decline, which it said resulted in subdued returns on property investment as economic factors negatively affected demand.
“The shrinking economy has stifled property development to such an extent that Zimbabwe has not had any cranes in the skyline for a very long time… (save for) the small housing developments particularly in the low income areas but even these are experiencing low take up rates (and) repayments are being spread over a long period,” the firm pointed out in the report.
The real estate firm said that demand for commercial and residential properties weakened further in 2015 compared to the previous year, with the problem of vacancies in the rentals market becoming so serious that some office blocks in the Harare central business district (CBD) recorded vacancies of as high as 60 percent.
“Voids have ballooned from an average of 15 percent last year (2014) to between 25 and 30 percent this year — the main highlight being Harare CBD office void rates averaging between 50-60 percent,” the Bard report said.
“Increased debtors have been noted in the industry translating into high arrear rates from about 20 percent last year to 30-plus percent in 2015. Most tenants are defaulting with the main push factor being the current economic crisis.
“As a consequence of these factors, the property yields have come down as well. Most sales on residential property are taking place on the small stands and high-density properties (with) few sales being registered for highly priced properties. Residential properties have witnessed a rental decrease of between 25-40 percent due to liquidity challenges and large numbers of unoccupied houses have been noted due to lack of tenants.”
Bard said as a result of weakening demand, rentals fell substantially as landlords opted to collect lower rentals than leave the properties vacant.
“Harare office rentals have declined from US$8 per square metre to US$4,50 per square metre for new lettings. A downward trend has been noted on rates with regards to office parks due to general under-performance in the local economy. Rentals are therefore expected to continue sliding. The Harare CBD office market has registered a vacancy rate above 60 percent, the CBD (market) is deteriorating as more companies look for cheaper and affordable space,” the report said.
The report said rental rates for industrial space in Harare had progressively declined from US$3,50 per square metre in 2013 to US$1,50 in 2015, depending on the size.
“The retail market has relatively performed better than office and industrial markets, although the effect of the informal traders on sales has not been quantified yet, we expect low volumes. For prime retail space the rates have declined from US$25 per square metre to US$15 for the Harare market.”
The property investment consultants however pointed out that despite the challenges the sector was facing, when compared to other investment options available on the Zimbabwean market, it could be safely concluded that property investments had fared better and were therefore worth pursuing.
“It is our opinion that institutional investors buy when the market is down. Perhaps this is the time to start investing in some good strategic location. Even in these trying times property has performed better than the stock market and other alternative investment options.”
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