By MacDonald Dzirutwe
HARARE – There is one bright spot amid Zimbabwe’s deepening economic chaos: the billion dollar house. Make that the 80 billion dollar house.
Although the southern African country is suffering an economic meltdown blamed by critics
on President Robert Mugabe’s government, real estate is booming as people hedge against the world’s highest inflation rate, now above 1,000 percent.
Harare real estate listings offer everything from old colonial houses built among rolling hills through modern, urban apartments to semi-detached houses in low income townships.
“Investors delight! 8 acre estate, 4 bedrooms, 2 bathrooms, kitchen and laundry, bar and a cottage” reads one advert. The asking price: $80 billion (US$806,443 on the official market and US$372,000 using black market rates).
A “priced to sell quality and superb 5-bedroom home with a family bath, large living area, fitted kitchen, pool and sauna and delightful gardens” in the leafy suburb of Chisipite will cost $45 billion, almost twice the price asked at the start of the year.
Analysts say the real estate craze is another sign of Zimbabwe’s upside-down economy and a currency that is losing its value faster than any on earth.
“The reason for this boom, if one can call it that, is a result of demand, but there is also an inflationary aspect as the market adjusts in line with the depreciation of the Zimbabwe dollar,” Boysen Mutembwa, managing director at BARD Real Estate in Harare told Reuters.
Once one of Africa’s most promising economies, Zimbabwe has endured more than five years of turmoil amid charges from both Western countries and local opposition parties of political repression and economic mismanagement by Mugabe — the country’s only leader since independence from Britain in 1980.
He denies responsibility for the ailing economy and in turn accuses the West, led by Britain, of sabotage in retaliation for the seizures of land from white commercial farmers.
The government has admitted inflation is one of the biggest hurdles in its efforts to reverse the economic slide which is raising fears of popular protest.
Annual inflation stormed to a record 1,042.9 percent in April, surging into four figures for the first time. The economic crisis is also marked by shortages of foreign currency, fuel and food and rising unemployment.
At the official exchange rate, house prices have risen between 30 and 80 percent during the first quarter of 2006, depending on location, and by over 2,000 percent over a year.
In U.S. dollar terms, the picture is not so bright.
BARD Real Estate estimated Harare house prices lost as much as 16 percent in U.S. dollar terms over the last year as the Zimbabwe dollar tumbled — although this was still a better performance than almost any other local investment.
“In the long term, property is a better hedge against currency depreciation than any other asset,” BARD said in a recent report on the market.
Industry officials say the crisis has slowed construction of new commercial and residential properties, fuelling demand.
Estate agents say the sector is driven by a few individuals and companies as well as some of the estimated 3 million Zimbabweans abroad, who sell foreign currency at double the official rate on a thriving black market to buy houses at home.
The Reserve Bank of Zimbabwe has set up the Homelink housing scheme for people in the diaspora who take out Zimbabwe dollar loans to buy or build property and repay in foreign currency at interest rates prevailing in their countries of residence.
It has attracted some foreign exchange inflows but many people abroad still offload their hard cash on the black market.
PROPERTY INFLATION HEDGE
Companies tend to invest in the property market for capital appreciation rather than rental income, while individuals do it mostly for speculative reasons or as a hedge against inflation, an official at estate firm Redfern Mullett said.
Analysts say last year’s controversial state clean-up drive, which included the widely condemned razing of urban slums that left thousands of people homeless, has also helped bolster property prices and rentals.
“Certainly the government clean-up exercise has contributed … not only to the rise in rentals but in terms of demand for houses, and in low income areas, it has pushed up prices,” said John Robertson, a Harare-based economist.
The Central Statistical Office said recently rents, which estate agents now review on a quarterly basis instead of biannually, were a major factor behind rising inflation.
For Zimbabwe’s urban majority, the runaway prices signal an end to dreams of home ownership.
“I have given up on trying to have a house of my own, some of us will probably just die tenants,” said Joseph Mukonori, a 41-year-old widower who lives in the crowded Highfield township.
A two-bedroom house in Highfield costs $3 billion. Mortgage lending firms only provide half the total cost at an interest rate of between 65-75 percent per year.
“I earn $8million (a month), so tell me how many years I have to work to save for a house?” asked Mukonori. — Reuter