Michael Tome, Business Reporter
PROPERTY investment and development company, Mashonaland Holdings Limited says its real estate business is likely to remain under pressure owing to restricted aggregate demand given the reduced purchasing power of the local currency.
2019 saw a noticeable reduction in the construction and real estate business as macro-economic changes instituted by the Government and the central bank resulted in a serious market unpredictability leading to a slowdown in property sales and space rentals.
According to Mash Holdings, a sizeable number of property owners withdrew their premium properties from the market while some pegged their properties in United States dollars, pushing property
values away from the reach of many potential home owners.
The retail and industrial sectors, however, remained fairly buoyant in the year thereby keeping momentum in this embattled sector.
Generally, occupancy levels across the property sector remain under pressure.
In his statement accompanying the full year results for the financial year to September 2019, Mash Holdings Chairman Ron Mutandagayi said, “The mortgages market was literally frozen out” adding that, “the decline in aggregate demand as a result of reduced real wages and purchasing power is likely to continue to put pressure on demand for real estate space and properties.”
On the other hand, Mash Holdings saw a decline in arrears as tenants took advantage of the falling exchange rate as well as rising inflation against the greenback.
Due to the descent in value of the local currency, property owners subjected their tenants to constant rent review matching the spiralling inflation.
In the year under review Mash Holdings operating profit surged by 79 percent to $12,6 million from $7, 1 million in the prior year (2018).
Revenue grew by 28 percent to $17, 6 million up from $13,8 million realised in the prior comparable period attributable mainly to shorter term rent reviews meant to contain runaway inflation.
Fewer repairs and property maintenance cost led to a modest increase of property expenses to $3,7 million which was 8 percent higher than $3,5 million in the relative period in the previous year.
Administrative costs spiked to close the year at $5,7 million from $3,3 million emanating chiefly from wages and salaries as the company cushioned its staff from the rising cost of living.
The real estate company indicated that property yields, in the year to come (2020), are likely to continue weakening, in the short to medium term, given the sluggish market.