Anyone who bought a property in Zimbabwe dollars from bank financing over the last four years got it effectively at less than 5% of its real value, while those that got mortgage financing in 2008 got their property at less than 1% of the real values due to miraculous benefits and healing effects of hyperinflation.
Many bargain hunters expect Zimbabwe’s property market to be hurting at all levels. But local and foreign buyers are in fact having to pay between US$160 000 and US$400 000 cash for modest three-bedroomed homes.
Despite Zimbabwe’s economy staggering on the edge of collapse last year with many companies shutting down, unemployment soaring and an average monthly salary of less than US$150, the property market was booming.
Middle-income and up-market homes in Harare are attracting high prices due to limited stock on the market.
Statistics released by global property advisory services firm Knight Frank via its latest research, the 2009 Africa Report, and estate agents in Harare show that the average house price in Harare is US$150 000 compared to about US$100 000 in South Africa.
Average prices in Bulawayo range from US$100 000 for an up-market home to about US$50 000 for a townhouse, and vacant two-acre plots in both cities vary between US$25 000 and US$35 000.
With no home loans available in the country, buyers are paying in cash. Wealthy Zimbabweans are putting their money into assets they believe will increase in value instead of banking it, said Eliusha Chabvamperu Phiri, regional manager for Knight Frank.
Knight Frank says it sells about three luxury homes monthly in Harare.
“Buyers are scouting for homes which they can add to their portfolios and sell at a later stage,” Phiri said.
Most local currency borrowing costs, which became as lucrative as -0,99% in 2008, benefited anyone who cared to borrow, from beneficiaries of Agricultural Support Productivity Enhancement Facility and Basic Commodity Supply Side Intervention Facility, to those who got loans to finance or refurbish their property portfolios.
“I remember presenting to more than 15 ‘big’ corporates and some listed entities during 2007-8 in their strategic meetings, and my key message was always consistent — urging them to borrow as much as their balance sheets could stomach and spend on their wish lists as long as someone would accept their Zimbabwe dollars,” economist Brains Muchemwa told businessdigest.
“Some took the advice and made miraculous changes on their balance sheets, but as time went by, no one serious accepted the local currency anymore as medium of transaction and eventually the death of the currency closed this exciting chapter in Zimbabwe’s history where a transformative credit binge made borrowers excessively wealthy whilst the lenders (banks and ordinary people with savings in banks which they couldn’t access because of the cash crisis) were condemned into extremities of poverty,” he said.
Muchemwa said the dollarisation has now brought about a sobering normalcy, whereby debt is real until it’s fully paid, and there will not be implicit discounts associated with excessive inflation anymore.
The predictability of future incomes and costs imply therefore
that the mortgage market reincarnation will come sooner, whilst construction projects that had stalled will be rejuvenated and more importantly, new developments will come on stream.