Construction stagnant despite high demand

Zim Independent

Kuda Chikwanda

KNIGHT Frank, one of the world's leading real estate agencies, has
said there has been very little activity in Zimbabwe's office and industrial
property markets because investors shying away from putting new construction
projects because of high costs. It is now more expensive to construct new
building that it is to buy complete structures.

In a report titled Global Real Estate Markets: Annual Review and
Forecast, 2007, Knight Frank said Zimbabwean investors have been holding
onto properties to hedge against inflation.

Those that have buildings are content to hold on to their properties
until the situation has stabilized. Investors on the other hand are taking
their money to short-term investments like the stock exchange and the money
market.

The report said there has been no investment in real estate because
people are not willing sell properties in the current environment.

"As with the office sector, there is little activity in Zimbabwe's
industrial market, as industrial properties are seen as a good store of
value in hyperinflationary times," the report said.

The report said the real estate market had been forced to hike rentals
by 100% every quarter because of inflation.

"The exceptional economic conditions in Zimbabwe have affected all
aspects of its real estate market. With inflation currently well over 1 000%
the current market practice is for office rents to be increased by 100% on a
quarterly basis," the report read.

Harare properties are now ranked 10th in a Strength Ranking survey of
12 African cities with rent prime yields for the office, retail and
industrial markets.

Knight Frank senior local partner, Amos Mazarire, said activity had
been suppressed by people holding onto properties as a means of protecting
the real values of their investments. Mazarire said the failure to build new
properties to meet the high demand.

"Demand is strong. People want to buy because of hyperinflation,"
Mazarire said.

Prices in the property market have been skyrocketing over the past six
months as supply surpassed demand.

"Since January prices have gone up by over 1 000%. And prices continue
to go up drastically. This is the worst period in the country's history for
property. The levels of price increases are just unprecedented," Mazarire
added.

Zimbabwe trailed behind in the retail property prime yields category,
offering just 3% yields as opposed to a 10 - 15% average for the capital
cities of most sub-Saharan countries.

Retail property prime rents were slightly less than US$100 per square
metre per annum. The average figure for the 12 surveyed cities is US$238 per
square metre per annum.

In the office property sector, Zimbabwe averaged yields of around 7%
whilst prime office rents stood at US$60 per square metre per annum.

The report goes on to say that Africa is set to benefit from
increasing foreign direct investment into the continent. It quotes the
latest Unctad figures which said US$31 billion flowed into Africa in 2005,
up from US$17 billion the previous year.

"Improving economic conditions should aid the development of the
continent's commercial property markets, though common obstacles include
high crime rates in CBD areas, shortages of high quality office space and
public infrastructure problems," Knight Frank added.

Source: http://www.zimbabwesituation.com/jun8a_2007.html#Z17