Property – Property rally slackens as rates rise

Shakeman Mugari

THE property market rally has come to a screeching halt due to the galloping interest rates that have shot through the roof.



ns-serif”>The property market hit the lowest mark after the new Reserve Bank of Zimbabwe governor Gideon Gono allowed market forces to determine interest rates.


The interest rate, which determines re-turns on the money market, hit a record high 900% last week.


This led investors to pour their money into the money market instead of the property market in search of quick returns. An analyst this week said the market was likely to continue on the downside if interest rates were left to rally on a free reign.


A spokesperson of a leading real estate company, Tony West Real Estate (Pvt) Ltd said the property market had been on “slow and quiet” over the last four weeks.


“The interest rates that shot up in December have seen the property market sliding,” said the spokesperson. “Individuals and investors are now investing on the money market because of the firming interest rate. They are now pursuing quick returns from the money market.”


December is usually a busy month on the property market as expatriates hunt for residential houses and stands.


An estate agency official said the bulk of the property business during this month comes from Zimbabweans working in the United Kingdom, South Africa and the United States.


He said December was unusually quite.


“December is normally a busy month for us but this year business was very low,” he said. “It was lower than last year.”


Analysts say the slump could also have been worsened by the uncertainty on the foreign currency market, one of the major drivers of the local property market in recent years.


The greenback last month fell against the Zimbabwe dollar.


Foreign currency rates plunged to as low as $4 500:US$1, down from a high of $6 000:US$1 in November.


The recession has been attributed to the increased inflow of foreign currency from Zimbabweans coming for the festive season from abroad.

According to analysts the situation has been worsened by the current liquidity crunch wreaking havoc in the financial services market.


“Because of the ongoing crisis in the financial services sector, many banks have been scrambling to offload their forex to meet their obligations,” said a property evaluator. “Because the pound and the greenback are not fetching much on the market the property market has been on the downside.” There is speculation on the market that some leading financial players have embarked on a selling spree as they scrounge for the little liquid cash to pay off clients and creditors.


Sources say some banks are now spinning off their major fixed assets such as buildings to meet their financial obligations.


They say some leading banks and asset management companies have flooded the property market pushing down house prices.


The buildings are now trading at slashed prices due to over supply and plummeting demand.


There is now an urgent need to sell buildings by some financial companies after the RBZ announced during the monetary policy that it wood be reluctant to offer support to institutes that seek urgent liquidity cover.


“With interest rates skyrocketing and the central bank now strict on liquidity cover the banks have nowhere to get funds other than selling some of their properties and buildings being the number one alternative,” said an economist.

© 2018 ALPHA MEDIA HOLDINGS. All rights reserved.
Powered By AMH Digital
Top