Currency crisis hits real estate sector

Zimbabwe’s real estate sector is under immense pressure to review rentals in response to the country’s deteriorating economy,

By Thomas Mupfuka

Zimbabwe’s real estate sector is under immense pressure to review rentals in response to the country’s deteriorating economy, which has resulted in rising operating costs, defaults and voids.

First Mutual Properties MD Chris Manyowa, told Standardbusiness continued macro-economic challenges, which had seen some businesses closing shop, were giving players in the real estate business headaches.

“We are trying to respond to the reality of rentals, which were denominated in US dollars in 2018, but in reality they were coming in RTGS,” he said.

“So, the reality of the matter now is that we are looking after a portfolio, which we should ensure that it preserves value and it is only reasonable to renegotiate rentals.

“When we conclude a renegotiation, it must not be for a very long time because there are a lot of uncertainties in terms of, for how long will the current rentals be sustainable?

“The rent you agree on must be sustainable and your review period has to be fairly short, maybe, say, six months up until we have clarity where things are going.”

Manyowa said the real estate sector had agreed to structure rentals suitable to each location.

“We said going by sectors, we have to say office park tenants can never be looked in the same manner as those renting out offices in the central business districts, as industrial and retail supermarkets there has to be a differentiation.

“It is a properly thought-out process where we will try to make sure that any rent proposals are reasonable and match the business affordability.”

Zimbabwe Stock Exchange listed property concern Mashonaland Holdings’ finance director Ndangariro Mutizwa revealed that the introduction of the interbank market rates had led to a change of property valuations from US dollars to RTGS dollar.

“As you are aware, a lot of valuations were denominated in US dollars prior to the monetary policy statement (issued in February),” he said.

“So if you go to Knight Frank or Dawn Property Holdings, they were doing valuations in US dollar.

“The reason why they were doing this is because the RTGS$ and US dollar were at par, but this is no longer in place.

“So, now that we are generating income in RTGS dollar, the valuations will naturally be in RTGS and what needs to happen now is that the property sector needs to play catch-up or they will need to increase rentals such that they can support the valuations.”

Zimbabwe’s property market has shifted notably over the last 18 months as the currency crisis and low investment continue to stunt growth of the sector.