The Sunday News
Dumisani Nsingo, Senior Business Reporter
THE property market remains the country’s most viable investment opportunity as both the money and equity markets have remained subdued due to the prevailing liquidity crunch in the economy.
Estate Agents Council chairman Mr Oswald Nyakunika said the country’s money and equity markets have virtually collapsed leaving property as the only investment where one can realise meaningful returns.
“Property investment remains the most viable when compared to money and equity market. Although there has been a demand for rent reduction the income return percentages are still good compared to the other markets.
“Property retains value over time. Money market has literally collapsed and returns or interest offered is very low.
Equity market is almost dead. There is very little activity,” said Mr Nyakunika.
Bulawayo-based economist Dr Bongani Ngwenya concurred with Mr Nyakunika’s sentiment stating that property investments were not susceptible to economic changes.
“During economic slump companies tend to perform poorly, and as a result affect equity investments significantly. If you look at the cash flow size or magnitude of share prices in the Zimbabwe Stock Exchange, share prices are measured in terms of cents, or even a fraction of a cent.
“That is a clear indication of a phenomenon that would prevail in a liquidity depressed economy like ours, and also an indication of declining confidence by the potential investors, especially foreign investors in our equity market in particular,” said Mr Ngwenya.
He, however, said the market value of property in a poor performing economy tends to appreciate, notwithstanding the diminishing demands culminating from liquidity challenges.
“However, the impact of negative economic fundamentals on property investments always and will always be marginal compared to financial asset investments like money market and equity investments. Risk is significantly very low on property investments as compared to money market and equity investments.
“Actually, equity investments are the most risk, especially in situations like ours when company closures are so rampant. It is always prudent for investors to hedge against risk by investing in property more during harsh economic situations,” Dr Ngwenya said.
Meanwhile, Mr Nyakunika said there has been a rent reduction of about 15 to 20 percent in most urban areas while at the same time there has been an increase in voids of up to 40 percent.
“Default rates remain unacceptably high. There has been a lot of cost cutting measures with many occupants having to cut down on size of space occupied. Where such flexibility exist or has been created it has been easy to lease the space. Sale figures have been affected negatively by lack of mortgage funds, cash and liquidity crisis. However, there has been insignificant change in property values,” he said.