Why is property in Zimbabwe so expensive compared to the region? It’s all about demand and supply and the high costs of construction, according to one of the country’s leading real estate investors.
Zimbabweans often compare the high prices of properties in Zimbabwe with those in South Africa and other parts of the region. According to Mashonaland Holdings, which is developing commercial and residential properties in Zimbabwe, the answer lies in the costs of building in Zimbabwe as well as the shortage of quality properties on the market.
The company explains in its latest half-year financials: “The development submarket remains hamstrung by the high construction costs, limited long-term financing and high cost of capital.”
Mashold says demand is high for residential properties. These “present investment opportunities for property developers in view of the positive demand for housing. The supply-side imbalance has led to an increase in property prices for medium to high-income residential properties.”
Zimbabwe’s volatile exchange rate makes it hard for property investors to get a good return.
“Attaining sustainable rentals has remained a major challenge for the property industry given the exchange rate fluctuations and wide disparities between official and unofficial exchange rates. In view of this background, property companies have converted leases for prime properties to United States Dollars while frequent reviews have been maintained for Zimbabwe Dollar based leases in order to preserve rental yields.”
On the state of the property market, Mashold is seeing low activity in the formal sector, “pockets” of growth in retail and office space, and steady growth in tourism.
“The property market remains constrained by the persistently low economic activity in the formal sectors of the economy. The low economic activity has led to a lethargic space absorption rate affecting mainly CBD office sub-sector,” Mashold says.
But it’s not all doom and gloom. Demand is good for office space and industrial space, and tourism is seeing growth.
“The tourism segment continues to record steady growth with increasing tourist arrivals in the first 6 months of the year thereby providing an attractive alternative investment destination for diversified property investors,” reports Mashold. Previously, the company reported that it was close to an agreement with a Dubai investor to develop a hotel property in Victoria Falls.
The company has started developing a new commercial space in Pomona, and completed a new hospital in Milton Park and a cluster home project in Bluffhill. This reflects where it believes value lies in property.
