Property market remains subdued

Property market remains subdued
The central business district has been affected the most with average occupancy declining from 78,74 percent in 2016 to 71,77 percent in 2017.

The central business district has been affected the most with average occupancy declining from 78,74 percent in 2016 to 71,77 percent in 2017.

THE property market remained depressed in the first half of 2017 owing to subdued economic conditions, with rental income suffering a knock during the period, stock broking firm MMC Capital has said.
In a first half economic and equities review released on Monday, MMC Capital said the unstable economic environment has had an adverse effect on the property market, resulting in increased voids, arrears, decreasing property returns and values across the board.
“The property industry remains in distress as market conditions continue to negatively affect rental prices as well as property values in certain sub sectors of the property market,” said MMC Capital.
“The central business district as well as the specialised industrial sectors have been affected the most with average occupancy declining from 78,74 percent in 2016 to 71,77 percent in 2017,” the stock broking firm added.
It said an unstable economic environment was likely going to continue affecting the property sector, which is expected to remain depressed throughout the year. The property sector is expected to perform poorly in line with the economic decline.
“Economic fundamentals are expected to remain weak; as such, the majority of key productive sectors of the local economy are expected to remain subdued, hence affecting the demand for real estate,” MMC Capital said.
The office property sector had been the worst affected as more vacancies and arrears were recorded, while the industrial property sector continued to perform poorly due to plummeting capacity utilisation in the manufacturing sector.
Various property sector reports released during the first half of the year indicated that the retail property sector recorded marginal returns, although rentals within that sector have declined.
Tenants have continued to rationalise space occupied in order to reduce the rental costs and related expenses. Property returns are expected to continue to slide downwards due to increasing debt levels, high void level, decreasing aggregate demand, a subdued economy, rent reductions and increased property ownership.
Most buildings have become white elephants due to prohibitive rentals, as tenants continue to shun exorbitant office and residential space and seeking refuge in former light industrial areas.
The property industry has also been seriously affected by devaluation of auctioned properties, a situation that has resulted in banks losing out.
Most lenders are reportedly failing to recover money lent through the auctioning of properties and are resorting to selling properties through private treaty or renegotiating the terms of loans in some instances.
MMC Capital said property counters witnessed a decline in revenue, a reflection of the sector’s performance.
“Financials from the listed property companies indicate that revenues continue to decrease. Pearl Properties Limited recorded a six percent decline in revenue to US$7,9 million for the full year ended December 31, 2016. Mashonaland Holdings experienced a 16 percent decline for the half year ended 31 March 2017, while for the full year ended September 30 2016, the group recorded a decrease of six percent in revenues. Listed property firms as most tenants struggle to remain profitable,” MMC Capital said.
Property returns have continued to plummet since 2009, having slightly recorded growth in 2011 at 10 percent and subsequently falling to six percent in last year.

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