Is Real Estate The Next Big Thing In Zimbabwe?
If the glimmers of improvement in once depressed real estate markets suggest something larger, then a long-term rebound may be getting underway mainly supported by the expected growth in real estate markets for the next 10-15 years. Though it’s quite early to make bold predictions about the rebound, positive developments have been noted in the sector fully supporting the notion. However, the growth largely depends on the successful commencement of the lined up projects, a stable macroeconomic and political environment together with the will of investors to continuously invest in the sector
The real estate market has its main facades as Leisure, Industrial, Office, Retail and the Residential market. It is many people’s belief – especially in the current situation – that real estate is just a servicing sector to other sectors of the economy. People tend to overlook the potential of real estate as the main pillar of the economy. However, recent developments in the market are showing that real estate is a real investment platform that can be utilised to propagate broader economic development.
A snap survey of the market shows that the rental market has stabilised since dollarization with relatively low yields. The increase in arrears has remained a scourge and the prolonged legal process to deal with the defaulting tenants has done no good to the sector. Industrial redesigning for warehouse and light industrial production has shown some positive development while heavy industry remains idle or with very low capacity utilisation. Home prices have stabilized by a certain degree. Sales are setting records again, despite cooling efforts from the government, and people are worrying about a bubble. Home prices have doubled in the past four years. Real estate has the potential to become the driving pillar of the economy above all other sectors in the next decade.
So what’s stirring the real estate market to produce such hints of a budding recovery? This is one of the questions that one might intuitively answer by just taking a look at some of the headlines that have been on the news even without technical analysis. The market has been sending a lot of sentiments that reflect a budding recovery and great potential for growth.
There are a lot of projects that the government and the private sector have lined up to initiate in the near future. Major projects that are on the cards are the proposed expansion of the Central Business District (CBD) that will see some residential areas being incorporated into the CBD, theMall of Zimbabwe that is due to be built in Borrowdale, the Russia-Zimbabwe deal could see new plant construction and employment creation, the construction of the multipurpose and multi-storey complex adjacent to the Joina City Mall in Harare and the recent calls by the Minister of Tourism and Hospitality to transform Victoria Falls in to Zimbabwe’s Disneyland.
Low income housing projects have also been on the increase in the bid to cover up the more than 1 million housing demand backlog the market has been facing. Here it seems investors are moving effectively to cover up the gap of which if the instance continues it provides potential growth to the market. CABS, for example, has successfully completed construction of 1 186 low income housing units setting the ball rolling for other players to tap into the gap. The case of affordability has been the major setback in such projects since the market was illiquid and potential buyers could not afford such houses. However, the recent announcement by CABS to extend their mortgage tenure to 20 years can provide solution to that problem enhancing more potential for the market to kickback.
A group of private investors and business community leaders have been having significant success transforming downtown areas of the city into a new hub for retailers, web-based and information technology start-ups. Several downtown properties that were in a dilapidated state for considerable time are being renovated and now house start-ups, computer services firms, clothing retailing and fast food businesses. Small wholesale shops are also being opened together with cosmetic shops.
Still in the CBD of Harare some properties are going through transformation and occupancy rates are slightly on the increase. The most noted development is the increase of Meikles Stores and other wholesalers in the south eastern sections of the CBD. Pick n’ Pay is also giving some old buildings a new lease of life contributing to the growth of the sector. Chinese developments such as the Long Cheng Plaza are also a positive development and attributes confidence on the market.
These signs of activity now visible in the real estate market do suggest there are some real potential here – and probably some serious opportunities.
post by Francis Chinjekure Courtesey of REIZ