Government intervention in Zimbabwe’s fiscal had a far-reaching impact on the property sector according to the ZIMRE Investments Limited Chairperson Jean Maguranyanga.
Country’s administration, February this year, amended the Reserve Bank of Zimbabwe (RBZ) Act and Issue of Real Time Gross Settlement Electronic (RTGS dollars) Regulations, 2019 (SI 33/2019) which introduced the local currency and ended the 1:1 US: Bond.
The government later abolished the multi-currency system and established the RTGS Dollar as the sole legal tender in the country.
Last month, the Zimbabwean President revealed plans to introduce notes and coins as the new currency of use.
ZIMRE’s chairperson said that the two interventions had a huge adverse impact on the property sector, particularly on pre-existing construction contracts, sale agreements on installments basis and contractually fixed US$ rentals.
“Contractors began to insist on contract re-evaluations to mitigate value losses, whilst revenues, particularly rentals, could not be immediately adjusted to match the exchange rate changes and inflation spikes,” Maguranyanga said.
“There was therefore loss of revenue values in real terms and property yields tumbled.”
“To mitigate the losses, most leases were migrated to more frequent rent reviews that provide latitude for adjustments that embrace developments in the economic environment,” Maguranyanga went on.
ZIMRE’s property portfolio, however, had a 47% improvement with rentals going up to $1.51 million from $1.03 million received the prior year.
“Collection for the period averaged 124% and this saw a reduction in overall portfolio debtors by 74% from $1.7 million same period last year to $0.9 million as at 30 June 2019,” Maguranyanga said.
“The average vacancy rates also marginally declined from 28% to 27% over the comparative periods with Gweru industrial, Bulawayo CBD offices and Harare Kopje area offices recording the highest void rates.”
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