THE property market has been at a standstill over the past five years as the skyrocketing of residential prices, high interest rates and drought in the mortgage market significantly reduced the number of homes changing hands and buildings being constructed.
Prospects of recovery remain weak on the back of increasing inflationary pressures expected to prevail in the long-term.
The property market has played second fiddle to other investment vehicles such as the money, equities and parallel markets. Should these vehiclesâ€™ returns remain firm, funds would be kept away from brick and mortar industry.
Residential properties remain priced beyond the reach of many potential buyers while rentals are ridiculously high. This week, businessdigestâ€™s Paul Nyakazeya (PN) spoke to Oswald Nyakunika (ON), Chairman of the Estate Agents Council of Zimbabwe, about what has been happening on the property market.
(PN) While prices of most goods and services are declining in US dollar terms, the same can not be said about the property market. How would you explain this?
(ON)Â I agree property does hold value, it always does in turbulent times. Itâ€™s a good hedge against inflation. However this is relative and its not exactly true that it is not affected completely.Actual sales indicate values have stabilised and are unlikely to improve in the short to medium term. The lack of mortgage finance/lending in US dollars has affected prices realised. We are beginning to see a return of deed of sale or purchase by installments. Â
(PN) What would you say is the standard or reasonable price (selling) and rentals for a standard house (three bed roomed house) in the low density, medium and high density?
(ON) There is no such thing as standard price or standard rentals. It depends on negotiations/agreement between the parties. Most agents were only licenced to lease and sale in foreign currency this January.
We now have plenty rental evidence but few sales evidence. What we have noticed is that most rentals are being concluded at the following rates:
(PN) How would you describe the property sector over the past five years?
(ON) There has been very little development due to ever increasing building costs and shortage of building materials. The rent regulations/legislation have also impacted negatively and made returns in the sector very unattractive.
(PN) What do you think is needed for the property market to be at the 1998 levels?
(ON) The economic fundamentals must improve to where we were in 1998. If you notice the economy started sliding down as from that year.
(PN) How is the property market reacting to the new inclusive government?
(ON) Itâ€™s too early to say.
(PN) Do you work with the ministries of Public Works and Local Government? If yes, what are your short-term plans?
(ON) There has been many contacts with the ministry as regards residential Rent Boards and rent regulations (which fall under the same Local Government ministry). I think what we are looking forward to is deregulation of the industry in terms of rentals.
I have also advocated for a revision of our building standards. It does not make sense when a developed country like United States with 1% homeless can build houses out of timber and ourselves with 40% homeless insisting on bricks and mortar. Yet in the past mud houses have been allowed (in Queens Park -Bulawayo) and in actual fact exist in most rural areas. We cannot be slaves to bricks and mortar when most of our people are homeless or crowded in tiny rooms as lodgers. We also need to look at infrastructure development such as sewerage.
(PN) There is so much price distortion on the property market what would you attribute this to?
(ON) Price distortions are a product of poor information dissemination. There are no price survey done or published and if they are they only circulate to few people.
(PN) If you were to be asked by the President and Prime Minister to come up with a plan to revive the property sector, what are the first three things you would do?
(ON) I will deregulate the industry, improve sewerage infrastructure, and revisit building material standards. Â
(PN) How would you compare Zimbabweâ€™s property sector and that of the region?
(ON) We are a little England when it comes to building material standards coming second only to South Africa. Our town planning is the best in the region. Our rentals are the lowest which is largely attributable to rent regulations. The latter has severely and negatively affected our development/building.
If you visit South Africa you will see building/development everywhere. This is the end product of a liberal economic regime. Â
(PN) Would you say estate agents are relevant under such an economic environment and are they carrying out their core business?
(ON) Estate agents do not only, value, sale, or lease properties but also carry out development appraisals and project management. Â