THE property market has ground to a standstill since the beginning of the month as skyrocketing residential prices, high interest rates and drought in the mortgage market reduced the number of homes changing hands.
Estate agents this week said the prospects of recovery remain weak on the back of increasing inflationary pressures expected to prevail in the long-term.
Since the beginning of the year the property market has played second fiddle to other investment vehicles such as the money market, and the trend was likely to be maintained with the majority of funds going into equities and the parallel market.
Should these investmentsâ€™ returns remain firm, funds would be kept away from the brick and mortar industry.
Property experts said the cumbersome bureaucratic system was likely to remain in place, with property market transactions taking a long time to conclude.
Against this background of an inflationary environment, this is expected to force investors into other forms of investment, as the value of transactions is changing significantly during the transaction period.
Residential properties remain priced beyond the reach of many potential buyers. This is worsened by the inability of potential buyers to access loans as building societies have not been offering mortgage loans.
A medium density house, which cost between $5 000 and $10 000 in January now costs between $5 million and $12 million (revalued). A standard three bed-roomed house in the low density areas now costs anything above $14 million from above $10 000 in January.
A standard house in the high density area is being priced between $3 million and $5 million from $600 and $1 500 during the same period.
Rentals for residential properties for medium and low density houses were pegged between US$200 and US$450. The same properties were being let for between US$150 and US$350 in January. Low density areas are being let for anything above US$500.
Property analyst, Matthias Kufandirimbwa, said the amount seems like a lot of money in local currency but when converted to US dollar terms it translates to very little.
In a statement on its website Merctrust Real Estate said because the local currency was depreciating, regular adjustments to the US rate had resulted in all the houses being sold in millions.
Estate agents said tenants were quoting prices in US dollars to “retain value on their investments”.
The criticism levelled against property companies by some sections of the market has been the tendency to aggressively push the revaluation gains.
In a statement Masholdings said: “It was accepted that in current circumstances, the effect of fair value adjustments is disproportionate to profit generated from turnoverâ€¦Fair value is determined by the directors and is based on independent professional valuations of properties taking into account current market conditions.”
For the tenth year running there has been no major developments on the property market due to the unstable environment. The only notable construction has been Joina Centre which started in 1999.
Drastic increases in building materials have affected developersâ€™ profits, with some planned developments having to be scrapped.
And those planning to build their own homes are having to significantly increase their budgets. This has been aggravated by the soaring price of raw materials such as bricks which now cost $65 000 for 1 000.
By Paul Nyakazeya