THE Real Estate Institute of Zimbabwe (REIZ) says the sector is yet to feel the impact of the Reserve Bank of Zimbabwe (RBZ) foreign currency auction system as there is still limited activity in the sector, which other observers say could be a result of other economic factors or a naturally slow response from the sector.
The country has been battling high inflation resulting in the erosion of disposable incomes while foreign currency shortages, on the other hand, drove exchange rate fluctuations, especially on the illegal parallel market. But on 23 June this year, the RBZ replaced the interbank market with weekly foreign exchange auctions to determine the Zimbabwe dollar exchange rate with experts cautiously optimistic that the platform will enhance transparency and efficient distribution of foreign exchange.
While the auction system has brought some kind of stability with the local currency appreciating during latest weekly sessions, the real estate sector is yet to feel the impact on the property market. The real estate sector had not been spared as sellers of properties adopted a wait-and see attitude, holding on to their properties due to currency depreciation. REIZ president, Mr Alexander Millin, indicated currency uncertainties posed challenges for the sector and called on the use of a currency that builds confidence and stimulates activity.
“We need a currency that stimulates activity, and measures that ensure the engine keeps running. Right now the real estate engine has stopped. “Currently people do not want to sell and get volatile local currency, you may not be able to replace your property with its actual value. The auction system hasn’t worked for the real estate sector yet, it is too early to talk about it,” said Mr Millin.
He was responding at a Global Renaissance Investments (GRI) online edition on economic development and outlook – new normal conference whose focus was on taxation in the new normal for economic growth. Observers, however say, the auction has gone a long way into bringing foreign currency stability but sectors will not feel the impact at the very same time. Supporting the point is that even after economic players were allowed to transact in foreign currency, activity was still subdued in other sectors, the property sector included.
“So, there could be other factors at play, liquidity is very tight in the market,” said Mr Walter Mandeya of Trigrams Investments. Apart from the currency uncertainties, the sector is also battling high rates from local authorities and Government taxes, which sector players believe are deterrent. Mr Millin said local authority rates are choking both the tenant and landlords, especially in the central business district (CBD), which is one of the factors driving declines in occupancy levels in commercial properties in the CBD.
“We need to look at the issue of rates from all perspectives, the landlord and tenant. The rates are too high, which is why some tenants are leaving the CBD because it is too expensive to maintain,” he said adding more needs to be done to an environment that encourages investment, especially by the diaspora market.
Economist Mr Eddie Cross concurred on the need to create an enabling environment that allows the real estate sector and all the other sectors of the economy to thrive. He highlighted formalisation of businesses and issuance of title deeds as one of the ways to unlock value.
“If 1,4 million people build houses on the ground they don’t own, why don’t we give them title. That will be like a $100 billion worth of property value unlocked,” said Mr Cross.