THE Estate Agency Council of Zimbabwe says the default rate in the property sector has increased to between 50 and 60 percent compared with the normal rates of between 10 and 20 percent, owing to economic challenges. Estate Agency Council of Zimbabwe chairman Mr Oswald Nyakunika said the default rate was expected to continue to rise until the economy stabilised.
“Default rate is still very high,” he said. “If anything, it is still going up at alarming levels, considering the serious cash crisis in the country.”
He said the increasing defaults had had a negative impact on property values.
Mr Nyakunika noted that many properties had been attached for failure to honour debts and were being auctioned for less than their market value.
Of late, there has been much activity at the public auctions with instructions from the Sheriff of the High Court on the increase as banks try to recover their debts.
Engineering company Gulliver in May had its property in Aspindale attached to clear a $1,8 million debt to ZB Bank.
Pharmacists CAPS Holdings’ property is set to go under the hammer after it failed to clear a debt with CBZ Bank.
The assets to be auctioned include CAPS giant factory in Harare’s Southerton industrial area, which comprise a drug manufacturing plant, a three-storey administration block with 47 offices, kitchen, bar with dispensary sections, packaging section, cold rooms, receiving bays and a clinic.
Property sales consultant Mr Kilford Mawurukira said the economic situation which was affecting tenants was also affecting property prices.
“Buyers have not been able to meet the prices demanded by property owners because of the liquidity problems,” he said.
The owners were now resorting to holding on to their properties in the hope that the economy recovers, enabling them to get more from their property or withdrawing them from the market.
But he said this applied to properties valued at $100 000 and above, while those valued at between $20 000 and $60 000 were not affected.
“Properties in that range have been going up because banks are giving loans to people based on salaries and this is the range met by most people who apply for loans.”
But Mr Nyakunika disputed this notion.
“The economic situation does not allow for the increase in property prices,” he said. “People are avoiding putting up their properties as collateral for fear of not being able to service those loans and having their properties auctioned at ridiculously low prices,” he said.
He said once the economy recovered, the property sector would start registering a change.
“The economy is still in bad shape, with many businesses closing down. There is so much uncertainty and one hopes the post-election environment will bring policy certainty and confidence to business.”