Zimbabwe’s real estate sector is expected to register a boom in the event of a lasting political solution from the fractious inclusive government formed three years ago, an international think tank has said.
Property prices trended upwards in the post-inclusive government euphoria in 2009, and slowed down due to low demand and discord within the coalition government.
Zimbabwe’s property construction sector then became lukewarm due to low incomes and a subsequent lowly mortgage bond market and limited capital inflows.
Despite all these developments, the property sector remains the second most rewarding form of investment after the money market.
Business Monitor International (BMI), a global research firm, said prices in the property sector were likely going to be bullish after a stable government despite already being higher than some regional peers.
Estimates show that 1 200 square metres of land in the capital costs US$1 000 compared to about US$700-US$800 in regional economic powerhouse, South Africa.
The property sector has over the years become an investment avenue for middle-class Zimbabweans living abroad due to limited wealth creation options on the markets. Citizens still living in the country have, however, relied on salaries and employer assisted mortgages to build houses.
“One area that domestic investors are increasingly excited about is the real estate industry,” read the BMI report.
“Zimbabwe’s huge diaspora sees property as a good way to leverage the country’s burgeoning political and economic recovery.
“Additionally, businesses are increasingly looking to move away from the central business district and into the suburbs, meaning that demand is booming for residential-to-office-space property conversions.
“Furthermore, although not necessarily undervalued, many investors believe that property values will explode to the upside if and when a lasting political resolution is reached and therefore see it as an attractive investment opportunity. Indeed, there are signs of a great deal of pent-up demand.”
The stability brought about by dollarisation of the economy, according to BMI, has seen the re-emergence of a white-collar middle class earning ‘real money’ as opposed to a local currency scourged by hyper-inflation.
“However, these would-be home-buyers do not have the financial resources to purchase houses for cash and options for mortgages are limited and extremely expensive where they are available. An improvement in perceptions of political risk will likely see an influx of foreign investment and lending, easing the liquidity squeeze bedevilling the economy and freeing up capital to sate this pent-up demand,” read the report.
In what could be an indication of recovery in the real estate sector, government this year expects the construction sector to grow marginally by 1,5 percent on the back of improved mortgage finance.
Currently, leading mortgage financiers, Central African Building Society and CBZ building society are active on the market offering mortgage financing for low cost houses.
The industry had suffered stagnation due to underfunding.
Apart from limited capital, the sector suffered from a massive skills flight as various craftsmen emigrated to regional neighbours in search for better employment prospects.