By Thomas Mupfuka
THE tumbling of the local currency against the greenback has significantly reduced property stock levels in the country, as sellers are now targeting property seekers mostly diasporas who are willing to pay in US dollars whilst landlords keep on hiking rentals in the interest of cushioning themselves against inflationary pressures.
In June this year, RBZ moved away from the 1:1 fixed exchange rate between the US dollar and the Zimbabwean dollar and pegging the rate at 1:2,5.
Since then, the local currency has lost more than 340% of its value and year-on-year inflation data was at 176% as at June 2019.
Real Institute of Zimbabwe (REIZ) president Alexander Millin, told the Standardbusiness that real estate sector is heading for tougher times as tenants are moving out of properties because landlords continue to hike their rentals in order to match the soaring cost of living.
“Landlords and tenants need to sit down, we can’t keep on in this trajectory. If tenants move out, what good is an empty building to the landlord?”
The situation now is that some buildings are now 50% vacant, and if this continues, who knows probably by December most buildings would be 75% vacant.
Sellers are not selling because they are not getting the right price. Value of commercial property is directly dependent on the income. At the moment, landlords are not realising anything from their properties,” said Millin.
A snap survey shows that commercial property in the CBD is being sold between US$8,10 per square metre, while office space is between US$6,10 per square metre.
Millin, however, said “before that US dollar was legal tender the values were more realistic. Now I could say probably it’s a process of adjustments because the practitioners are still getting used to the transition to the local currency.
“What it has certainly done is that, it has reduced the number of properties for sale because owners have adopted a wait-and-see attitude.
“The impact is reduced business levels, and reduced housing stock levels as there is an element of uncertainty.”
This is happening at a time most companies are investing in properties in an inflation hedging move to protect their balance sheet.
Fine and Country Zimbabwe, CEO Karen Nyenga said the current inflationary pressures have hit property sales and quality tenants.
“We are witnessing a mix of clients, but a significant amount of them are diasporas who are coming back to invest in the country. This is good for business because they pay in hard currency. In terms of tenants, we are focusing much on corporates and a few individuals.
The rising cost of doing business has affected our operations as we had to adjust a lot in order to stay in business,” she said.
The US dollar has gained more value on the local market due to high demand for imports by local consumers and businesses, loss of trading confidence in the local currency and hyperinflation which calls for preservation of value in a stronger currency.