Hard currency sales boost property sector
Akribos Capital Research Services says the construction and real estate sectors are currently in their prime since the inception of the Covid-19 pandemic in 2019 and the partial dollarization era which started in 2020.
The Government under the pretext of assisting the public to deal with the devastating effects of Covid-19 promulgated Statutory Instrument (SI) 85 of 2020, allowing payment of goods and services using free funds’, with any person allowed to use free funds for the purchase of goods and services in Zimbabwe.
Akribos in its second quarter 2022 economic report said the partial dollarization saw a recovery in the property sector, especially in the residential submarket since sellers are now able to sell in hard currency compared to the past when it had become a buyers’ market as sellers were not willing to accept local currency mortgages.
“Despite forex shortages, high inflation, and low disposable incomes, strong demand in
the residential submarket has continued to attract new developments and is invariably
being supported by the diaspora market,” it said.
Akribos added that demand for CBD and suburban retail space, and industrial warehousing
has also been driving investments in these segments to fill up the gap that exists.
The CBD office segment has remained subdued since the pandemic, and this has seen
decreased rental incomes in this submarket.
In its first quarter 2022 trading update, Mashonaland Holdings reported that it had
accepted an offer to dispose of its low-performing properties which include Charter House
to reduce concentration in CBD office space.
On other hand, Zimbabwe’s infrastructure development has also witnessed remarkable
growth in the period under review as several government projects spanning various
sectors such as transport, agriculture, energy, and mining have moved gears up.
The Government has also dualised and rehabilitated most highways and urban and rural
road networks, which were declared a state of disaster in 2019.
“In addition, the impact of climate change has also seen the Government move with speed
in dam construction as part of its efforts to boost agriculture production.”
Akribos said that all these infrastructure development projects have presented growth
opportunities for listed and unlisted entities in the construction sector to participate in
the sector growth and thousands of jobs have been created for locals.
“However, the worsening inflation and exchange rate depreciation have continued to
threaten the viability and sustainability of these long-term infrastructure development
projects, given its impact on US$-denominated materials pricing,” it said.
In May 2022, the Government responded by increasing the ratio of partly US$ payments to
contractors undertaking various public infrastructure programmes from 30 percent to 50
percent to cushion constructors and curtail the amount of liquidity flowing into the
economy.
“This was a commendable move by the government in reducing demand for the US$ which
was causing a faster devaluation of the Zimbabwe dollar. However, on the other hand, the
lack of adequate long-term financing presents a downside risk to the completion of these
projects,” Akribos said.
It noted that the Government has since resorted to using short-term financing which
introduces rollover and interest rate risks and can generate economic costs such as high
inflation.-The Herald
