By Eric Chiriga
United States (US) dollar exchange rate speculation has significantly driven up property prices in Zimbabwe’s capital, Harare, as buyers move to hedge against the volatile bond notes, a latest Knight Frank Zimbabwe (KFZ) report has revealed.
This comes as bond notes — a unique currency introduced by the Reserve Bank of Zimbabwe in November 2016, valued at par with the greenback, to solve a deepening cash crisis — have lost value against the US dollar on the parallel market to trade at around US$1 as to $1,20.
According to realtor KFZ’s 2017 Annual Property Report released last week, “in Harare demand for residential properties to purchase increased in the last quarter of 2017 with demand exceeding supply”.
“This was because many people were trying to convert the RTGS values into tangible assets. However, most sellers are demanding payment in United States dollars.
In situations where bank transfers are being accepted, purchasers are having to pay a premium,” KFZ said, adding “as a result of the increased demand, prices for high value houses increased by about 15-20 percent, between 2016 and 2017”.
It said “the residential property market is now a seller’s market”.
KFZ said the mortgage market has also been negatively affected, with interest rates rising beyond home-seekers’ affordability.
“Mortgage finance is at interest rates of between 15 percent and 17 percent per annum. The rates are considered very high and the majority of home seekers’ incomes cannot support the resultant repayments.”
On the other hand, KFZ said the tough economic environment has not only affected property buyers, but also those seeking to rent.
“Due to high unemployment, low disposable incomes…the demand for residential accommodation to rent decreased while the supply has increased,” the realtor said, further stating “residential rental values have continued to decline and voids are high”.
“In Harare, rental values for 3-4 bedroom houses have remained the same at $1 500 to $2 000 per month between 2016 and 2017.”
It said securing quality tenants takes up to four months for flats and up to six months for a prime house.
Crucially, KFZ said “rent defaults have worsened and in most cases many tenants abscond after accumulating rental and utility cost arrears”.
“Landlords are finding themselves having to inherit these debts,” it said.
In Bulawayo, KFZ said, prime rents for high value houses are in the range of $600 to $ 700 per month. Rentals for one-bedroom, two-bedroom and three- bedroom flats are $ 250, $ 300 and $ 350, respectively.”
“Overall, there are limited speculative housing schemes taking place because the high construction costs put the completed units out of reach for the majority of potential buyers,” KFZ said in the report.
In Bulawayo, prices for high value houses are in the region of $200 000 to $250 000.
One-bedroom, two-bedroom and three-bedroom flats are fetching US$20 000, US$30 000 and US$40 000, respectively.
On industrial properties, KFZ said: “Zimbabwe’s industrial sector continues to decline with some manufacturing companies either shutting operations or scaling down.
Lack of credit, high interest rates, competition from cheap imports and obsolete production equipment have negatively affected Zimbabwe’s manufacturing sector.” DailyNews
