No cheer for homeowners

AS property owners continue adjusting rentals to suit Zimbabwe’s deteriorating economy, market watchers say they expect the sector to remain depressed this year.

Old Mutual Securities (OM Securities) early this week said the property market was not poised for any growth in 2017, advising buyers to snap up as many properties in preparation for a boom in the future.

“We forecast continued deterioration in rental yields as economic activity continues to slow down.
“Recovery in this sector is subject to economic activity at the micro level improving,” OM Securities said in its 2016 annual report.

Property sector prices have remained more or less unchanged from the 2015 levels on a cost replacement basis, however, the earnings yield for most property classes deteriorated during the course of the 2016.

“For the listed space, average property rental yields declined from an average of eight percent in 2015 to six percent in 2016.

“In the outlook businesses are revising cost structures downwards with tenants continuously renegotiating their rentals downwards and or right sizing their businesses into smaller spaces.

“This should see rental yields remaining depressed,” the analysts said.

Local property companies have also predicted that the real estate sector will remain subdued in the medium term, with players saying the country’s tough economic conditions are affecting occupancies, knocking rentals, driving voids and in some cases leading to downward reviews of lease agreements.

Last year, Zimbabwe Stock Exchange-listed property groups like First Mutual Holdings’ Pearl Properties revealed that the prevailing economic conditions had also led to a decrease in rental incomes.

The market’s fundamentals have largely remained depressed due to weakening aggregate demand — increasingly affecting the ability of tenants to service their lease obligations — which has led to soaring defaults, plunging occupancy levels, more evictions and voluntary space surrenders.

Other property companies have reported voids so high, mostly in their industrial space portfolios and Central Business District space, with some even mulling disposal on units or converting them to other uses.
Meanwhile mortgage lenders like FBC Building Society also revealed that they had been forced to dispose of upmarket land banks as stands instead of developing the areas into residential stands.

Listed short-term insurer NicozDiamond also told analysts recently that it had resorted to rental tenants at its Hatfield Diamond Villas project as the project’s uptake had been “below expectation” on the back of low disposable incomes.

Across board, property firms have been reporting poor results with most failing to break-even.

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