Property firms on decreased space uptake as Zim economy crumbles

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By Alois Vinga

COMPANIES operating in the property sector have bemoaned decreased space uptake owing to poor economic conditions prevailing in the country.

Speaking recently, First Mutual Property’s (FMP) chairman Elisha Moyo, said performance remained under stress over the past year.

“In 2019, the Zimbabwean property market remained subdued, characterised by high levels of voids.

“The economic outlook remains uncertain due to climate change, erratic power supply, foreign currency challenges, and low productive sector capacity utilisation,” he said.

Moyo said the retail and office park sectors remained relatively stable during the year due to limited availability of quality space.

“Development risk remains high due to inflationary pressures affecting development costs.

“However, in order to protect the value, property investors are entering into new developments taking a long-term view, assuming the development risks and utilising available excess liquidity to hedge value and inflation risk in real assets,” said Moyo.

FMP financial performance shows an increase in operating profit of 88 % on the back of improved occupancy levels and turnover rentals.

The value of the investment property portfolio grew by 53 % driven by fair value gains. Rental income decreased by 12% to ZWL$57.42 million (FY2018: ZWL$65.25 million) underpinned by foreign currency translations.

Another major property firm, Mashonaland Holdings Limited (MHL) chairman, Roy Mutandagayi also bemoaned the impact of a collapsing economy on viability of business in the sector.

“The operating environment worsened during the period under review as economic activity continued to shrink in the face of headwinds,” he said.

He said the property market continues to be at the receiving end of an economic environment characterised by declining capacity utilisation and monetary policy inconsistencies.

The reported growth in money supply in the fourth quarter of 2019 fuelled inflation.

“Whilst the property market responded with regular rent reviews, the general reduction in economic activity meant that constrained rental growth could not match prevailing inflationary pressures,” he said.

The MHL financial performance for the year 2019 shows that revenue at ZWL$30.1 million was 44% higher than the same period in the prior year.

The increase in revenue reflects the positive impact of rent reviews effected to hedge against erosion of rental value due to inflation.