New Zimbabwe.com

FMP Credits Hybrid Currency Policy For US Dollar Denominated Lease Surge

Spread This News

By Alois Vinga


THE Reserve Bank of Zimbabwe (RBZ)’s policy slant allowing the infusion of foreign currency into local transactions has triggered a surge in US dollar denominated leases during this year’s first quarter, listed real estate concern, First Mutual Properties (FMP) has reported.

Under Statutory Instruments 185 of 2020, the RBZ granted members of the banking public permission to use their free funds in settling local transactions.

The move has unlocked foreign currency for many companies in Zimbabwe thereby easing business transactions.

In a trading update for the period ended March 31, 2021 released recently, FMP hailed the measures highlighting the positive impact generated on the investment.

“Pricing of space continues to migrate towards inflation and currency indexed models to preserve value, while there is an increase in foreign currency denominated leases as property owners seek to benefit from the provisions of SI 85 of 2020,” said FMP.

The firm also hailed annual headline inflation deceleration to 240.6% in the first quarter of 2021 from 676.4% in first quarter 2020 largely attributable to the stability of the exchange rate.

However, FMP bemoaned the property market’s subdued demand for space saying the Central Business District Office sector is the worst affected, while the retail and industrial segments of the market remained resilient with steady demand.

“Commercial sector transaction activity remains subdued as property owners seek to hold on to assets as value preservation strategies. Transactions within the property market continue to be concentrated around the residential sector,” the company said.

During the period under review, revenue increased by 411 % compared to the same period in the prior year, driven by rent reviews, higher turnover rentals and the occupancy level rising to 89%, mainly attributable to net lettings in the Central Business District office and retail sectors.

“Property income grew at a slower rate of 331% during the period due to reinvestment in repairs and maintenance, to improve space quality and accelerate leasing efforts.

“A total of $7 million was spent during the quarter on property maintenance, while the business remained focused on accelerating digital strategies and talent retention,” FMP said.

Investment properties at the end of the quarter were valued at $9.6 billion following a Directors valuation, representing a 3% increase from 31 December 2020.