Govt projects to drive economic growth
ASSET managers, First Mutual Wealth (FMW) says increased infrastructure spending by theGovernment will drive economic growth and demand for real estate properties.
The Government through the National Development Strategy 1 (NDS1) has been pushing for accelerated infrastructure development in partnership with the private sector.
To that end, several infrastructure projects including roads, housing, tourism, and airports are at different stages of implementation.
FMW in its economic and market review for 2021 and 2022 outlook, said demand within the real estate sector will increase in tandem with increased economic activity.
“Property developments are likely to be skewed in favour of storage, warehouse, retail, port or transport hubs and residential developments, while central business district (CBD) office space and recreational developments are likely to have lower relative activity in the immediate term,” the company said.
It added that it expects innovations in the form of Real Estate Investment Trusts listing on local public bourses to enhance the pricing and liquidity of property developments.
“Therefore, we recommend this asset class for long term funds that seek value preservation and consistent investment income from positive real rental yields,” said FMW.
The company noted that the economy has been rapidly dollarising in the background as most rental contracts are being quoted in US dollars.
“In the same way the Government has adopted the approach of collecting taxes in the currency earned, the same trend has been witnessed in the property sector as more rentals are being collected in hard currency,” it said.
The wealth management firm said in 2021, developments in the property sector continued to show steady signs of recovery with the impact of Covid-19 having a lesser negative impact on economic activity.
“The residential sector continues to show strong demand largely underpinned by diaspora-based expenditures and certain Government housing infrastructure projects.
We expect continued recovery in the property sector for 2022,” noted the company.
Generally, the property sector has been negatively impacted by low demand and downward rental reviews to attract new tenants and retain existing ones.
In Harare for instance, companies have moved into predominantly residential areas such as Milton Park, Belvedere, Mt Pleasant, Eastlea and Belgravia,but without replacing the housing stock.
There is a need for a shift in town planning to allow for property firms to turn their buildings into residential properties, rather than create white elephants.-herald.cl.zw
