Each day, the business sections of Zimbabwe’s leading newspapers carry ever-more-dire fiscal news. But to understand the unraveling of the country’s economy, the real estate pages are hard to beat.
In May 2007, a three-bedroom home with manicured gardens and a swimming pool in the upper-middle-class suburb of Borrowdale cost 4 billion Zimbabwe dollars. Six months later, the house was still on the market, this time listed for 380 billion Zimbabwe dollars. That house is still for sale, but last month a similar home in the same enclave went for 8 trillion Zimbabwe dollars.
Welcome to the mad, mad world of business in Zimbabwe. According to the World Bank, the country has the world’s fastest-shrinking economy; inflation is rocketing forward by about 165,000 percent a year.
With the Zimbabwe dollar fast depreciating, most Zimbabweans rent or pay for real estate in U.S. dollars or in Zimbabwe dollars pegged to the black market rate, which means daily changes due to currency fluctuations. In April 2008, the official exchange rate was 30,000 Zimbabwe dollars equaled one American dollar. At the black market rate, one U.S. dollar bought 55 million Zimbabwe dollars.
Still, the property market for high-end and upper-middle-class homes has remained relatively stable in real terms. Up until an inconclusive national election held last March, analysts in Harare said the one sector of the economy that had been dependable was real estate. (As the old adage goes, nothing is as safe as a house.) Brokers say that most properties are paid for through bank transfers, which begin and end in foreign accounts.
“It is our opinion from market evidence that there is high demand for all forms of property, (that is) commercial, industrial or residential, but this unlike the norm is not driven by high returns from property, but rather the need to hedge against rapid loss of liquid money value due to inflation,” leading property consultants CB Richard Ellis said after a recent survey.
Now, with the country in post-election turmoil, brokers in Harare report that many of the city’s high-end homes for sale have been abruptly pulled off the market as buyers wait to see which side wins the election.
Brokers say about 600 upper-middle-class and high-end homes now get sold each month, half the number of five years ago. Agents say that single-family homes in posh suburbs like Avondale and the Highlands area go for between $140,000 and $145,000, down about 5 percent in the past year.
If Robert Mugabe remains at the helm, analysts say real estate will continue to be an attractive way to invest money.
“The property market … is propelled by excess liquidity that is existent in the economy,” said Brains Muchemwa, an economist with the Genesis Bank, a leading commercial bank in Zimbabwe.
Should Mugabe lose, brokers say prices would remain steady in the short term, but might decline within a year as foreign investment returns, the country’s economy begins recovering and new houses get built.
Until only a few years ago, Zimbabwe had one of Africa’s strongest economies. Downtown Harare, the capital, has skyscrapers, busy shopping malls and high-end hotels. Its middle-class and high-end housing stock includes everything from downtown condos to old Colonial homes with deep verandas, swimming pools and tennis courts.
Yet hyperinflation has felled Zimbabwe’s manufacturing, tourism and farming sectors (among many others), worsened unemployment and race relations, and prompted a mass exodus. One quarter of the country, about 3 million residents, has emigrated in the past several years.
Economic analysts say current demand for properties is being driven by shortages of quality properties. The spiraling cost of buying building materials means there has been almost no new residential construction in several years. According to Corry and Mukuyu Quantity Surveyors, building costs for ongoing projects “may safely be escalated at plus 900 percent” on a monthly basis.
“I think this government has shown that it does not respect the sanctity of property rights, and if it is re-elected, we will see the current trend continuing,” said John Robertson, a Harare-based economic consultant. “In real terms, there would not be any exuberance, but mere value preservation in properties.”
For now, getting a loan to build or buy properties is difficult. Since banks aren’t offering fixed-rate mortgages, borrowing money domestically can be punishing.
“The lack of mortgage finance due to prohibitive interest rates and high construction costs has retarded the levels of construction, and the building material basket went up by 69,117 percent during the year 2007,” Bard Real Estate said in its latest annual report.
This article was researched and written by a Harare-based reporter.