PROPERTY values in Zimbabwe have plunged by as much as 40%
in the second quarter of this year due to the Covid-19 pandemic, a new report
has revealed.
According to the Integrated Properties research, the
reduced business activity during the lockdown introduced in March to slowdown
the spread of coronavirus has made it increasingly difficult for tenants to pay
rentals.
“The undeniable impact of Covid-19 has been on the capacity
of tenants to pay the rentals as the lockdown tremendously affected business
operations, movement of people or customers, limited operating hours, limited
international trade impacting on restocking or supply of raw materials, “ said
Integrated Properties in its second quarter research.
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“All those factors reduced revenues on operating entities
invariably reducing their capacity to pay rentals, which are a critical
component in the calculation of capital values.
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“In a nutshell, property values have taken a knock due to
Covid-19.
“In real terms, the cumulative impact will be as high as 30
to 40% at the end of the year.”
The lockdown that initially saw a total shutdown of the
economy was partially eased in May where big businesses were allowed to reopen
under strict conditions.
President Emmerson Mnangagwa subsequently extended the
lockdown indefinitely citing the rising number of Covid-19 cases.
Integrated Properties said property sales during the period
under review also went down drastically as both buyers and sellers developed a
wait and see attitude.
“We note, the economic situation on the ground reflects
that the decrease in property sales is due to the reduction of disposable
incomes of many Zimbabweans as properties are becoming unaffordable to the
majority of the population,” reads the report.
“The Covid-19 impact on the economy is unimaginable as the
general economy is expected to shrink.
“The pandemic mitigation measures, which include restricted
movement could directly be a huge contributing factor to the reduction in sales
as property visits have been restricted and decisions to buy are only supported
by an inspection of the subject property.”
The researchers observed that conducting valuations had
been affected by the Covid-19 pandemic since the procedure involved physical
inspection of properties and measurements.
All these activities involved movement, which is restricted
under lockdown measures.
“There is also market uncertainty which has arisen as a
result of the pandemic although it is external from the valuation process,” the
report added.
“The valuation process is conducted using historical
evidence that would likely have taken place before the pandemic and the impact
of which is not reflected in market evidence.
The major blow to the property management business was the
three month rental moratorium at the beginning of the lockdown, which
businesses interpreted to mean it covered the commercial and industrial sector.
Additional operating costs in the form of sanitisation of
premises and labour for temperature checks, meant reduced net flows to the
owners while at the same time increasing responsibilities for property managers.
In the previous year, office space uptake was poor as a
result of the depressed economic climate in Zimbabwe.
Tenants have been struggling to meet rentals and service
charges, and the levels of arrears were generally high.
Defaults in the office sector have increased significantly
with demand declining due to the underperforming economy.
The researchers said the property sector’s recovery in the
near future remained uncertain given the unpredictable nature of the Covid-19
pandemic.
It has put pressure on the office space market and rental
growth as a result of low economic activity and reduced business activity.
“Access to the central business districts (CBD) was a
challenge putting pressure on the performance of properties within the CBD
highly affecting the sector,” the Integrated Properties research report added.
“The sector’s occupancy level is estimated at 60% for the
bulk of the office buildings in the CBD and this is projected to decrease as
companies adopt technology for remote working and voluntarily surrender space
surrender.”
Zimbabwe’s economy was already struggling before the onset
of Covid-19 due to a myriad of reasons that included a collapsing economy and
low levels of direct foreign investment. Standard
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