Prices in the property sector are anticipated to remain
high going into 2019 compared to regional peers, on the back of inflationary
pressures, a local research firm has said.
Old Mutual Securities (Omsec) said going into the New Year,
the property sector was set to see higher prices compared to regional peers on
the back of high costs of building materials for new developments.
“The short-term should prove difficult for property
companies but improved economic activity in the medium to long-term should
benefit the sector.
“We maintain that comparatively higher financing costs as
well as the high cost of building materials for new property developments will
see property prices remaining high when compared to regional peers,” the
analysts at Omsec said.
The country’s inflation firmed 10,16 percentage points in
November to settle at 31,01 percent, against currency uncertainty which has
forced most investors to hedge in the property sector.
Towards close of the third quarter, the country was hit by
a cement shortage, leaving the construction industry stranded, while in some
instances resorting to the black market. This, according to industry insiders,
also pushed the cost of inputs in the construction industry.
Meanwhile, IH Securities (IH), another research firm,
recently predicted property counters on the Zimbabwe Stock Exchange (ZSE) will
remain under pressure as voids continue to surge in the sector driven by weak
economic fundamentals.
According to IH, the ZSE’s property counters — First Mutual
Properties, Mashonaland Holdings, Dawn Properties and Zimre Property
Investments — had also seen softening demand on the back of a growing informal
sector with little use for commercial properties.
“While demand for office rental space in the CBD weakens, demand
for retail space remains relatively strong in both the CBD and suburban areas.
However overall we anticipate occupancies will continue to remain under
pressure with limited scope for rental increases,” the analysts at IH said in
an equity strategy paper.
Property companies continue to see low demand for space on
the market as companies have very few quality tenants.
“This has turned property companies into price-takers as
quality tenants influence their own terms. The growing informal sector poses a
risk to the sector as people move away from renting large office spaces and opt
for ‘mobile’ offices,” IH said.
First Mutual Property chairperson Elisha Moyo, is on record
pointing out that despite Zimbabwe’s improving business confidence and economic
fundamentals, demand for space has remained subdued with occupancies in the
property sector flat.
“Despite the improving economic fundamentals, strong Gross
Domestic Product (GDP) growth is still required to significantly increase
effective demand for space.
“The socio-economic dynamics of the economy are seeing
property investors adapt the product offering, to meet the needs of the
informal sector,” he said in a statement appending the realtor’s first half
results, Daily News
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