Depressed economy hits property sector

via Depressed economy hits property sector – DailyNews Live 30 NOVEMBER 2014

HARARE – Tight liquidity conditions coupled with the deteriorating economy continue to hit the property sector’s growth, latest realtor’s financials have indicated.

According to listed Dawn Properties (Dawn) and Mashonaland Holdings (Mash Holdings), property market players’ revenues have significantly declined due to a decrease in occupancy levels.

Tenants are also struggling to pay rentals resulting in high defaults.

In the year to September 2014, Mash Holdings registered a 12 percent slump in revenue to $6,8 million due to high voids levels and some lease reviews.

“The property sector was not spared… Asset values in the real estate sector shed off some of the value accumulated since dollarisation,” the group said.

During the period under review, property expenses increased by 121 percent from $800 000 in 2013 to $1,9 million.

“These expenses represented 26 percent of income, with the spend largely driven by the provision for credit losses and the voids related costs. The increase in provisions for credit losses was reflective of rising tenants default rates,” Mashold said.

A net property income after administrative expenses of $3,1 million was posted, while investment properties recorded a valuation loss of $3 million against a gain of $6 million recorded in 2013.

Despite a positive net property income after expenses, the group posted a loss for the year of $26 587 against a 2013 profit of $9,9 million.

“The loss was as a result of the decline in capital values of investment properties. Knight Frank Zimbabwe carried out an independent valuation of our investment property portfolio as at September 2014, and valued the portfolio at $104,2 million, a three percent decline from 2013,” the group said.

On the other hand, Dawn’s revenue for the six months to September 2014 slumped by four percent to $2,7 million from $2,8 million due to the operating environment which remained constrained as the liquidity crunch escalated.

Dawn also stated that the weakened performance was largely because of its property consultancy arm which was trading at 12 percent behind the corresponding period.

“Operating expenses decreased by eight percent due to cost cutting initiatives that were instituted,” the company said.

As a result the operating profit for the period under review decreased by 11 percent to $779,108 compared to $874,791 in prior period.

The carrying amount for investment property remained unchanged at $85 million while cash and its equivalents for the group were up by 33 percent to $2 million compared to $1,6 million.

The rental income for Dawn’s hotel portfolio at $1,38 million was five percent above the prior year.

“This outcome was primarily driven by major conferences held both in Victoria Falls and in Harare during the period under review with operating profit increasing by 21 percent to $641,312,” said the group.

With revenues expected to remain under stress, Dawn said cost containment would remain in sharp focus to preserve profitability.