Headwinds are set to persist for the properties sector in the wake of the global Covid-19 pandemic after enduring a tough first quarter in 2020 driven by deep rooted internal challenges, a latest report shows.
Prior to the Covid-19 pandemic Zimbabwe’s economy was already in severe stress following the devaluation of the local currency that saw value eroded in real dollar terms.
Now according to the 2020 first quarter property market study carried out by Integrated Properties, a real estate consultancy firm, property values particularly for commercial sector are set to take a major drop due to disruptions in rental incomes and distorted cash flows.
“It is imperative to note that market values are dependent on the future benefits which include right to use, occupy, enjoy and rental income. Commercial property values are dependent on rental cashflows, as such the organisational capacities to pay rentals will be compromised which will affect property values,” read the report.
Already government has given tenants a temporary rental relief to settle their monthly dues in three installments and this is likely to affect the rental income for the sector during the second quarter.
The report notes that tenants continue to scale down operations reducing space occupied in a bid to manage business costs and this is increasing void rates especially for Harare CBD.
In the first quarter, office space rentals softened averaging USD 5 per square meter from highs of around USD 7 last year same time.
“Rental arrears will increase especially for buildings accomodating small to medium enterprises which are already incapacitated,” the report stated.
In the industrial sector, there were high void rates and low rental yields as national industrial production capacity remained relatively low at just 30 percent.
While the harsh economic environment already incapacitated most tenants to meet their rental obligations, the residential sector is set to be worsened due to the impact of the Covid-19 lockdown that have affected household earnings.
“Its going to take long for the property sector to recover. Remember before Covid-19 we had very complex issues to deal with that include taming inflation among others. So with the pandemic and a cocktail of other after effects from it such as job losses and viability constraints, its still a long way before the property sector is out of the woods,” economic analyst Pepukai Chivore said.
