COMPANIES have joined cash-rich individuals in investing in the lucrative property market, sending prices sky high as they try to hedge against spiralling inflation.
Analysts say it is now a case of the “rich getting richer and the poor poorer”.
Zimbabwe’s inflation currently stands at 269,2% but predictions are that it will continue to soar and touch the 450% mark by year-end.
Property markets last year registered high growth levels with residential housing prices increasing more than threefold, largely due to demand-push effects of depreciated parallel market rates. The rates saw many Zimbabwean nationals working abroad seeking to acquire properties locally.
Analysts contacted this week said contributing to this growth were the portfolio-rebalancing effects of high inflation, as economic agents sought to protect their wealth from negative real returns in money markets by ploughing their savings into the “self-indexing” properties market.
In an interview First Mutual Life Assurance Society of Zimbabwe chief executive officer Norman Sachikonye said his company was eyeing the property sector “to increase shareholder funds because the sector is lucrative”.
First Mutual is finalising plans to demutualise by the end of June and relist on the Zimbabwe Stock Exchange (ZSE) during the third quarter of this year.
Sachikonye said: “One of our objectives when we demutualise is to increase shareholder value by venturing into various sectors, which bring in money such as the property market. This should help us retain shareholder confidence and value.”
He said First Mutual would embark on a capital raising exercise before listing.
The society currently has assets valued at more than $50 billion – $17 billion being in prestigious office properties such as Arundel Office Park.
Mashonaland Holdings Ltd (Masholds) has told shareholders that it was considering venturing into “property investments” because they “are sound”.
Company chairman Godfrey Gomwe in his statement accompanying the unaudited results for the six months ended March 31 2003 said: “The outlook remains difficult under current economic conditions. However, the board feels optimistic about the long-term prospects for the company if suitable properties can be acquired. Property investment portfolios generally represent a sound hedge against inflation and a new initiative in this regard would offer investors an opportunity to make sound returns.”
Masholds turnover for the six months, at $15,1 million, was generated from rentals received.
The company’s operating loss from continuing operations of some $27 million was reduced to $12,5 million.
Gomwe said: “Only the Mash properties division continues to operate, the rentals from which along with investment interest, provide current revenues for the company. These are insufficient for long-term sustainability and the board has decided, in principle, to actively pursue the transformation of Mashonaland Holdings into a dedicated property investment and development company, using its listing on the ZSE to this end.
Considerable interest has been shown in this concept and shareholders will be advised of progress in due course.”
Zimsun Leisure group chief executive officer Shingi Munyeza’s company is also mooting the idea to focus on properties.
Munyeza told shareholders that for many years the value of the real estate owned by Zimsun had not been reflected in the company’s market value.
Zimsun is currently valued at $18,6 billion.
Munyeza said: “The board has sanctioned the demerger of these properties in order to unlock shareholder value. Once approved by shareholders and the regulatory authorities, the new entity will drive value for the real estate interests of the shareholders. This process is in line with international trends, which allow the company to focus on hotel and leisure management skills.”
However, property agents contacted this week said the market was “very dead” as far as the residential market was concerned.