BY SHAME MAKOSHORI
CURRENCY volatility that troubled Zimbabwe last year hit mortgage lenders hardest as nervous investors switched to cash transactions, compounding headwinds triggered by months of lockdown, according to a report by Integrated Properties (IP).
Building societies entered the COVID-19 crisis already suffering from falling demand because of a brutal carnage on consumer buying power.
Now, fresh lockdowns this year, and a tattered economy have aggravated an already bad situation for the lenders.
Property buyers are sending cash straight to sellers, according to IP.
In its property market report for 2020 released last week, IP said headwinds that confront lenders were confirmed by limited mortgages and loans to the construction sector in 2020.
“It was announced during the 2021 budget presentation that of the productive loans advanced, only 2,21% and 0,4% were directed towards mortgages and construction respectively, an unfortunate scenario for the real estate sector,” IP said.
“This, in a way confirms the assumed position that most purchases are cash transactions. The mortgage market is dying and its resuscitation is underpinned by currency stability,” said IP.
At the heart of the crisis is the pandemic, which has delivered a gut punch to the economy, which never really got fixed after the economy hyper-inflated back in 2008, destroying the domestic currency, banks and key industries.
The 2021 national budget statistics quoted by IP confirm that lenders are cautious to throw loans recklessly, in case the virus forces the few remaining qualifying customers to suddenly stop servicing loans.
In any case, Zimbabwe’s mortgage lenders may not be prepared to handle another economic crisis, or help their customers through it, as this can drain them out of capital.
A decade ago, they lost out due to hyperinflation and a switch to the multicurrency system in 2009.
In the aftermath of the banking crisis in 2008, many mortgage lending businesses have been integrated into commercial banks.
Among those still standing alone, one is already scouting for strategic partners.
IP said inflationary trends would dictate the direction of the property market in 2021.
“Inflationary pressures and currency stability will attract excess liquidity into the sector as hedging is a prerequisite for astute investors,” the report said.
“Real estate investors in Zimbabwe have found property as one of the best alternative hedges against inflation and with the cloud of uncertainty hovering over our currency’s stability, more investment will be directed towards property.
“As more people adapt to working remotely, this will also see reconfigurations within homes to allow for workspaces, thus creating opportunities for renovations.
While this enhances values for properties with study/offices, the downside of it is that it leads to the decline in demand for office space. Once this phenomenon has become entrenched in people’s lifestyles, there may be no going back. However, overall prospects for the office sector will not be clear until the virus is eradicated and normal working patterns emerge. In the short run, particularly in the city centres, office rentals and occupancy will continue to decline,” the report noted.