SANDTON? NO, IT'S PLUSH HARARE

Simpiwe Piliso
Published:Jun 22, 2008
Zimbabwe’s economy is in a mess, but the property market is booming.
Despite the economic meltdown, Zimbabwe’s property market is by no means a bargain basement.
Wealthy locals and expatriates are splashing out on modest homes and mansions for millions of rands that could easily secure them addresses in some of South Africa’s most sought-after suburbs.
Just this week, a four- bedroom home in Borrowdale Brooke near President Robert Mugabe’s official residence was on the market for R8.5-million, while another in Greendale outside Harare was listed with a R13-million price tag.
In the embattled country the average price of a home is R1.4- million — although that does not buy anything to write home about.
And, due to the local currency woes, almost all deals are done in US dollars.
Harare estate agency Merctrust Real Estate, in a statement on its website, said the currency was in free fall.
“On Monday last week we adjusted the rate to Z4- billion/US1 and on Monday this week it was Z10- billion/US1 and on Wednesday it’s Z15-billion/US1.”
The agency stated that all the houses in its books, many in Harare’s plush northern suburbs, are now for sale in quadrillions of Zimbabwe dollars.
“Very soon it will be quintillions.”
Prices in the country’s residential property market have been “skyrocketing” over the past six months as supply surpassed demand, according to Knight Frank, a London- based property research consultancy.
An ordinary three bedroom home with no major extras, in Mount Pleasant, a modest suburb in Harare, is on the market for R3.5-million.
Knight Frank’s latest annual research report — Global Real Estate Markets: Annual Review and Forecast — shows that Zimbabwean homeowners and investors are holding on to properties to hedge against inflation.
Others have simply shelved their plans to sell in the current environment as a means of protecting the real value of their investments.
Property listings in Harare and Bulawayo offer everything from old colonial houses, luxury modern apartments to semi-detached houses in low- income townships.
Juliet Harris, managing director of Pam Golding Properties’ operations in Zimbabwe, said most South African buyers seeking to invest in Zimbabwe were shocked by the prices.
“It appears that most are of the opinion that they will be getting a bargain basement. When they are appraised of what properties in fact cost, most shy away.
“But be that as it may, there are South Africans who are investing in Zimbabwe ... and they either buy houses or land which they can, at a later stage, develop.”
She said most South African- based buyers were spending between R1.2-million and R5-million for homes and apartments in Zimbabwe.
One buyer recently paid a record R8-million for an eight- bedroom home on “one of Harare’s most affluent streets”.
The 10 000m² property features two lounges, underfloor heating, a cottage, five staff quarters, a squash and tennis court, an enormous swimming pool and an automated garden irrigation system.
Homes could easily fetch R8- million in Harare’s northern suburbs, the most exclusive of which is Borrowdale Brooke, where Mugabe lives.
The suburb is littered with mansions that are homes to the highest-ranking members of Mugabe’s Zanu-PF party. Among them are embassies and the homes of the country’s business executives, socialites and expatriates.
London newspaper The Daily Telegraph recently described how the élite in the suburb enjoyed lives of wealth and privilege, while the vast majority existed in grinding poverty and struggled to survive.
At the local supermarket, a Spar franchise, close to Mugabe’s hillside residence, almost anything is available, including focaccia bread, sun- dried tomatoes and cigars.
The further away one moves from the exclusive suburbs, the more “affordable” the homes become.
In some of these suburbs the average price is in the region of R2-million, while on the other side of the city, in the sprawling township of Chitungwiza, a two- bedroom home is on offer at R70000.
In Bulawayo, statistics released in April by Knight Frank show that the average price for a suburban home in a prime area is about R2.4- million, while the price of a townhouse in the same area is between R800000 and R2- million, and a basic flat between R320000 and R800000.
For those not prepared to pay such high prices, there is the option of the rental market.
According to Knight Frank, a four-bedroom home in a prime location in Zimbabwe can set a tenant back US500 (about R4000) a month.
This was the average rental for a four-bedroom home in Harare’s northern suburbs four years ago.
According to a report released by Standard Bank’s research economics section, many investors eager to invest in Zimbabwe have opted to wait and see until after the run-off presidential election on Friday.
“The economic crisis will continue as long as the political landscape is not stable. The international community is waiting in anticipation for a new regime to enable it to participate in rebuilding the country,” the report said.
According to Seeff Properties, which has more than 45 properties on its books in Zimbabwe, when political stability returns to the country, property prices are likely to surge .
Seeff’s licensee in Zimbabwe, John Spicer, declined to comment.
“I am afraid to say that it is not politically expedient to make any comment at present.”
Chas Everitt International managing director Berry Everitt, who recently announced plans to open offices in Zimbabwe, said international investors were showing interest in Zimbabwe.
With scores of international companies waiting on the sidelines to invest in Zimbabwe, a surge of new home seekers could pour into the country after the run-off elections.
Among these companies are mining and banking groups.

RENTAL MARKET A HIVE OF ACTIVITY

Potential buyers ‘sit on sidelines’ as higher interest rates make property too pricey for many
THE South African residential rental market is experiencing intensified activity as prospective first-time buyers and struggling homeowners opt to rent instead of buy. The residential property market has taken a battering since the beginning of the year thanks to higher interest rates, which have made property too expensive for many.
The National Credit Act, which came into being in June last year, has also made it increasingly difficult to qualify for mortgage bonds.
Andrew Schaefer, MD of residential property manager Trafalgar, says the group’s letting consultants have “never been busier across all our branches”. He says: “They are now run off their feet trying to secure rental accommodation for prospective tenants.”
Schaefer says the activity has intensified over the past four months. The rental market is generally cyclical and is busiest at the beginning of the year. “We’ve seen very high levels of activity and inquiries since January this year.
“It’s been much busier than last year. There has been a significant upturn. Vacancies in many of our portfolios are at historic lows of below 1% in some cases,” says Schaefer.
He says the market is also seeing much more aggressive rental increases because demand for accommodation is so strong.
Schaefer believes SA will see an improvement in the buy-to-let market because vacancies are so low and rental increases are relatively good compared with prior years. The fundamentals would suggest that this would continue at least for the medium term, he says.
“There is uncertainty among buyers about the outlook for interest rates and affordability, given the fact that fuel prices are rocketing. They are opting to rent rather than buy.
“It allows them time to manage their short-term finances better and gives them flexibility deciding when to buy at a better time,” says Schaefer.
Potential first-time buyers who have decided to rent instead of buy are an important driver of the rental market.
There is also a growing number of mortgage defaults, and many homeowners may opt to sell rather than rent.
Saul Geffen, CE of ooba, formerly MortgageSA, says the weakening property market has increased demand for rental property as “potential buyers sit on the sidelines”.
He says rental yields are rapidly improving, which underlines the “investment case” for buy-to-let.
But property economist Erwin Rode, of Rode & Associates, says that while it is “quite an attractive argument that when you can’t afford to own a house, you choose to rent”, this is not always the case .
Rode says the same economic factors that inhibit owners also inhibit renters. One example would be inflation.
“The only difference between a buyer and a letter is in the case of the buyer, you are affected by fast-rising interest rates on the mortgage bond.
“A further factor to consider is that when times are tough, many people double up — for instance, children move back in with their parents. As a consequence historically, there hasn’t been a negative correlation between house prices and rentals.”
Rode says the latest information indicates that rentals are growing at between 7% and 9%, depending on the city.
“If you compare that with inflation that is pushing 11%, it should be clear that there is no boom out there for the rental market,” Rode says.
Lewis Civin, MD of Redcon Property Development, says that property investors remain “poised for rental growth” as Reserve Bank Governor Tito Mboweni raised interest rates by half a percentage point last week. “Investors in the low to medium price range can expect to see continued growth in rental income as home buyers even at this level are drying up.
“Investors in one of our recently completed developments in Boksburg saw a 20% increase in rental income on a one-bed unit over eight months,” Civin says.