LACK of investor participation is causing the shrinkage in the property market of Zimbabwe, Knight Frank said in its Southern and East Africa report for 2004.
“The collapse of foreign investor confidence and termination of financial aid have led to the persistent shortage of foreign currency which is very vital in the construction industry,” the report said.
The International Monetary Fund withdrew from giving the country financial assistance and this has also contributed to the decline of the construction industry.
The report said the economy was now in desperate need of investment and the resumption of foreign financial aid would enable private funds tied up in loans to government to be liberated for private investment.
The report said investor participation in Zimbabwe’s property market through the construction process had largely dried up as building costs have escalated and a number of schemes put on hold.
Of late building costs are very high because of the high inflation, which had reached alarming levels of more than 600%. The costs continue to escalate despite the decrease in inflation now at 448%.
However, the report said, the soaring rate of inflation had fuelled the demand for property and equities in an attempt to hedge against the rising prices.
The report said that in Zimbabwe’s industrial market, demand for large-scale industrial units had waned as the manufacturing sector had suffered in the economic crisis.
Demand is strong for smaller units of land mainly due to entrepreneurs who are using residential space for small-scale manufacturing and office space.
On the other hand, in South Africa’s industrial market occupier demand is strong for good quality stock of which there is now limited supply while there is an abundance of poor quality product, the report said. On Zimbabwe’s residential market, the report said there had been a substantial rental growth above the rate of inflation.
Landlords with properties on the top end of the market are increasingly quoting rents in hard currency because of the high inflation.
“Demand is strong for cluster houses, town houses and good quality garden flats as they generally have good security and access to amenities but leasing on high quality accommodation is largely driven by diplomats and officials of non governmental organizations who can afford to pay in hard currency,” the report said.
In the Botswana market demand is higher for middle to lower middle cost housing and this has resulted in their scarcity.
Rental values are erratic particularly at the top end of the market.
In the South African residential market, the availability of cheaper mortgage funds has helped forge local demand in traditional residential suburbs.
Demand for secure accommodation continues to be strong among middle to upper income groups.