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Building Residential Properties Expensive

DID you know that in Zimbabwe it costs more to build a residential property than to buy one? An observation by businessdigest has shown that it is more cost effective to purchase a house in the medium and low-density suburbs than to construct a similar building.

In Zimbabwe it costs US$250-US$500 per square metre to build compared to an average US$100 in the region.
Analysts this week said what has made building a residential property more expensive is the cost of building materials which are still high due to duty imposed on imports.
Construction Industry Federation of Zimbabwe (Cifoz) president Daniel Garwe told this paper on Tuesday that buying a finished product was still cheaper in Zimbabwe than building a similar property.
“Prices of building materials are still expensive in Zimbabwe. This is because most of the building material is imported,” Garwe said.
“Imported building materials are expensive because of the duty that is imposed. Some builders and contractors still have a Zimbabwe dollar mindset of profiteering,” he said.
Garwe however said the advantage of building one’s own house was that “everything is done as per one’s instruction”.
“Most properties are in need of renovation as a lot of homeowners were failing to maintain their houses during the hyperinflationary environment,” he said.
Ailse Properties managing director Andrew Chifamba also said building a residential property was expensive.
“A house in a medium density area such as Msasa Park is being sold for between US$30 000 and US$40 000. It costs about US$250 per square metre to build which can translate to about US$55 000, which is more expensive without including other unforeseen costs,” Chifamba told businessdigest this week.
Chifamba said building could be cheaper if potential homeowners sourceed building materials by themselves and took longer to build without stretching their budgets.
“In Highlands, a stand costs about US$40 000. The value of a property on that land costs between US$100 000 to U$150 000. It will cost more if one is to build a house that is in the same league as those in the same neighbourhood,” Chifamba said.
Chifamba however said it might be cheaper when one already had a stand. “Cost does not equate to value as market determines prices.”
A total of 1 000 common bricks cost between US$50-US$90 while the same quantity of face bricks cost US$100 –US$190. Semi-common bricks are being sold for US$40-US$90.
Gutters cost US$9 per 2,4 metres, covel — US$35 dollar, underflash and sock US$9. Ordinary door frames cost between US$24 and US$35.
Five cubic metres of pit sand cost between US$40 and US$60; the same quantity of river sand between US$45-$60 and quarry dust US$50-US$60 while gravel is being sold for between US$70-US$80.
Five litres of gloss paint cost between US$25-$40 while PVA is being sold for US$27-US$35. A bag of cement costs between US$8-US$10.
Residential properties in high-density areas are being sold for between US$25 000 and US$40 000. Properties in medium density areas cost between US$45 000 and US$60 000. Residential properties in low-density areas are going for anything above US$80 000.
Property analyst Micheal Russell said while the property market was adjusting itself after dollarisation the same could not be said about building a house in low-density areas.
“The rental yields, themselves a function of the income levels and the pace of economic activity, have improved in the middle density and low density segments but the cost of building when compared to the region has not,” he said.
“If one is to do a cost build-up of the house they want to build, especially in low density areas, they might be tempted to buy a finished product unless they have steady incomes from various sources,” Russell said.
Considering building costs averaging about $1 200 per square metre of office space in Harare, commercial property returns, in particular prime office rental yields, have improved significantly to around 8% in real terms from as low as 0,5% during the 2007-2008.
Meanwhile rentals have moved from US$4-US$6 per square metre to between US$8-US$10 and about US$12 for better buildings.
The major players in the property market in the region, in particular private equity funds, are targeting investment destinations offering internal rates of return above 20%. Considering the current and projected slow growth of Zimbabwean incomes and the absence of a clear and tenable exit market, the majority of international players sitting on hot capital are not putting Zimbabwe on their radar for property investments.

 

Paul Nyakazeya

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