Rumbidzai Zinyuke Business Reporter
THE country’s property sector is not likely to experience significant growth in 2014 as default rates and the amount of voids continue to rise unabated. Default rates have remained as high as 50 to 60 percent compared to the normal rates of between 10 and 20 percent and this has been attributed to the liquidity challenges in the country which have in turn led to the deterioration in the quality of tenants.
Meanwhile, Government has projected a 5 percent growth in real estate by 2018 in the new economic blueprint – Zimbabwe Agenda for Sustainable Socio-Economic Transformation.
Considering the liquidity constraints prevailing in the Zimbabwe, the projection could be unattainable as estate agencies complain that individuals and companies are failing to pay rentals or buy properties as they cannot afford it.
In an interview, Estate Agency Council of Zimbabwe chairman Mr Oswald Nyakunika said the main reason 2014 was looking gloomy for the sector was because there were no investors.
“There is need to boost investor confidence so that companies can start to function properly. At the moment, companies are closing down and the number of empty buildings is high. I am not talking about retail space but industrial space which has been lying idle,” he said.
He said arrears have also remained high as the liquidity crunch is talking its toll on tenants.
This year, there was a lot of activity at the public auctions as instructions from the Sheriff of Court to attach property increased with banks trying to recover debts.
Engineering concern Gulliver in May had its property in Aspindale attached to clear a debt of US$1,8 million owed to ZB Bank and pharmaceutical company Caps Holdings’ property also went under the hammer after it failed to clear a debt with CBZ Bank.
“If investor confidence returns, companies will start functioning normally and take up vacant buildings then we will also start to see some changes in the sector, but at the moment things are looking gloomy,” Mr Nyakunika added.
The problem of companies closing down has been made worse by capital constraints as there are only a few investors willing to bail these companies out.
Some economic analysts have predicted that ailing firms that are facing economic challenges going on annual shutdowns are not likely to reopen next year. Mr Nyakunika noted that the projected growth was unattainable considering the problems they were facing.
He said the recovery of the property sector was anchored on the recovery of the economy.
However, some building societies and insurance companies have been responding to the demand for housing by investing in housing schemes.
The schemes range from those that extend loans in order to finance construction of a house to mortgages for purchasing completed housing units.
If low-income earners are able to adhere to the terms of such schemes, then the property sector could experience some growth after all.