Three-tier pricing affects property market

Source: Three-tier pricing affects property market | Herald (Business)

Tanaka Makuwaza Business Reporter
Zimbabwe`s property market has been grossly affected by the three-tier pricing system that has led to properties being valued at low prices, real estate agents have revealed.

The prices of properties are increasing due to the introduction of the three – tier pricing system by majority of property sellers. Residential stands are being sold at different prices depending on the payment method. Properties attract higher prices if the payment is done through plastic money and bond notes. Dawn Property Consultancy general manager, valuation and advisory services, Kudakwashe Chadambuka, said this has affected the property market. He said this during an interview on Capitalk FM radio last week.

“For example, stands in Mt Hampden upper market residential area are being sold at $40 per square meter. If the payment for the same area is to be done through swipe or bond notes, it rises to $64 per square meter.”

“Definitely it has actually affected the property market. When you look at your commercial properties there are a function of the rentals that you realise from an investment, but as we speak at the moment rentals are depressed and we have a situation where rentals and capital values are not related at all, which is an abnormal situation” she said.

The property company’s head of sales and development, Mr John Kondo, concurred: “We have a situation where demand is out stripping supply. One of the reasons is that there is a lot of liquidity in the market that’s looking for a home, so you find that the bids that actually go in the market particularly for those transaction that can be done using the RTGS or transfer, are the ones which are actually moving the prices up and contributing to this demand.”

The three-tier pricing system emerged at the end of November 2016. The system was caused by the shortage of cash in circulation especially the US dollar. The system has not only affected the property market only, but it is also being practiced by retailers and house owners.

In the blog of JP Koning, it is mentioned that in the US, whether it be a VISA card, paper money issued by Federal Reserve, or a deposit created by either a big bank like Wells Fargo or a tiny one like Wisconsin Bank and Trust will (almost always) accept each of these monies at the same rate.

This situation then differs in Zimbabwe where prices depend on the mode of payment being used with electronic transactions attracting a huge premium above 50 percent in most cases. The real estate agents also commented on the factors that affect property values that is rental values and market prices.

“Market values for residential properties are a function of what similar properties have recently sold at, aspects like location, size and quality also come into play. Market values for commercial properties are a function of market rentals and yields.” said Ms Chadambuka.

Weighed in Mr Kondo; “Looking at this market, lets split it into two – you have got an existing stock market, which is what we call your secondary market stock and then you have got a new stock that come on the market.

“So with existing stock, it’s a demand and supply situation as to what the bidder is willing to pay against the asking price. But with the new stock, you realise that its actually on a cost plus margin basis of course not forgetting the VAT aspect of it, so you will find that two properties in the same locality, one being new and the other one in secondary market stock will have different prices.”

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