PROPERTY MARKET REPORT FIRST HALF 2014 Prepared by: Harare 7th Floor Bard House 69 Samora Machel Av Tel – 263-4-755338/ 748785/ 749993/ 758007 Fax – 263-4-749507 Bulawayo 1st Floor Forestry Commission Building 71 Fife Street Tel – 263-9-61938/60647/8 Fax – 263-9-61939 www.bardproperty.co.zw Operating Environment The Property Market The economy continues to slide downwards as evidenced by the drop of the economic growth rate from 4,4% in 2012 to 3,4% in 2013 and projected be depressed further to 2 -3%. Major challenges faced in 2013 spilling into 2014 include: The decelerating property market cycle which has not yet reached its lowest point is having a disastrous effect on the market: Tight liquidity conditions Power shortages and collapsing infrastructure Massive de-industrialization High country investment risk High un-employment rate High trade deficit due to too much reliance on imports Potential economic failure caused by the increase in the informal sector that does not contribute to taxes. Hence collapsed of the government services. Increase in vacancy rates. Increase in rental arrears Increasing legal costs due to arrears chasing and evictions Burdening service charges such as rates and water. Rental reductions. The market has witnessed an unprecented increase in vacant and unlet residential and commercial properties. The numbers are increasing monthly. Dropping property standards and high rate of poorly completed and uncompleted land developments Expensive financing and mortgage facilities discouraging borrowings and limiting activity within the sector Increasing illiquidity of properties especially large commercial properties since 1979 www.bardproperty.co.zw Commercial Property We have Rent Buy Sell ? Harare 7th Floor Bard House 69 Samora Machel Av ? ! Tenants &Buyers Tel – 263-4-755338/ 748785/ 749993/ 758007 Fax – 263-4-749507 waiting Bulawayo 1st Floor Forestry Commission Building 71 Fife Street Tel – 263-9-61938/ 60647/8 Fax – 263-9-61939 The Retail Market This sector witnessed increased returns in 2011, especially in Harare, due to high demand of smaller shops in the CBD. However, in 2012 and 2013, activity stabilized due to competition (supply for small shops became saturated). The graph below shows movement of rentals from 2009-2014. In other towns Mutare, Beitbridge and Victoria Falls, rentals have slightly dropped at the end of 2013 resulting from a drop in activity as the towns adjust to economic constraints. Bulawayo, Gweru and Masvingo have generally maintained, the current levels for 2013 General decrease in retail rentals throughout is expected in 2014: Landlords previously pursuing the maximisation strategy have been forced to reduce rentals as tenants failure rate has reached unprecedented levels The Office Market The CBD office space has decreased due to lack of demand, particularly in Harare. As the vacancies continue to increase, it is expected that rentals will drastically reduce in the future, this will have negative implications on the values. The rates for office parks slightly shifted upwards between 2012 and 2013 due to an increase in demand as a result of relocations from the CBD in the case of Harare. However, the vacancies in this sub sector has started to increase and we project rentals to come down by the end of the year. Industrial Sector De-industrialization has picked pace in most towns, companies are either relocating or collapsing due to lack of demand and capital. This has resulted in increased vacancies and abandoned properties. Demand for industrial properties is very weak at the moment. Most operating industrial buildings are used for storage of imported finished products. Recently a large industrial space let in Harare was let at 50c/m2, this clear proof that some landlords have become disparate and knowledgeable tenants are taking advantage. The market will soon drift towards rental holidays as long as the tenant can afford to pay rates. Good tenants are in effect detecting to landlords, that they want, i.e. a take it or leave it situation. Vacany Rates Rent Arrears and Yields Vacancies are now more prevalent in all sectors. In 2013, most portfolios recorded vacancy rates between 15% - 20%, with the push factors being downsizing and closure of firms/organizations. Some organizations are failing to meet rental obligations as they try to adjust to the subdued economy. The vacancies are increasing, estimated to reach 30% to 40% 2014. Property Values Most property investors particularly those with a strong bias on the office sector are faced with high office vacancy rates, arrears and high operating costs. The market conditions obtaining are offering no exit route due to the tight liquidity conditions. The depressed market conditions have caused the rapid deterioration of most CBDs. To resuscitate the CBDs a new way of thinking may be required. In Johannesburg for instance most old office buildings are being converted to residential use. Bard Real Estate research has established that some landlords have resorted to a number of incentives to keep their buildings occupied such as rental holidays for up to 12 months and rental reductions. The landlords are fighting for very few tenants who are able to pay rent. It is now a case of having a building occupied, the property return has taken a back seat in the minds of property owner www.bardproperty.co.zw Since 1979 Smart Sellers, Buyers, LandLords & Tenants rely on the Integrity Professionalism, Accountability & Excellence of We have the expertise, the experience, and the tools to help you every step of the way Harare 7th Floor Bard House 69 Samora Machel Av Tel – 263-4-755338/ 748785/ 749993/ 758007 Fax – 263-4-749507 Bulawayo 1st Floor Forestry Commission Building 71 Fife Street Tel – 263-9-61938/ 60647/8 Fax – 263-9-61939
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