Ian Fife
Hitler Hunzvi is going to eat your lunch. He is at your dining table, his hand up your daughter’s skirt. His men defile the most personal possessions in your home, which they say is theirs, then slaughter your spouse and children. That is nightmare number one right now in the white suburbs of Southern Africa, relegating to number two and three ruin from massive property taxes or interest rate hikes.
This time, of course, the Zimbabwe land invasions pierce an eternal archetype: the home as the castle and safe as a house. Fear ripples out from Harare to Johannesburg, Durban and Cape Town.
So it’s a shock to discover that there is still a property market in Harare, or that agents say any slight softening of the Johannesburg market is due to interest rate uncertainty rather than Zimbabwe. Owners put their homes on the market. Buyers snap them up, expecting life to return to normal and prove the properties a bargain. Agents report record turnovers. Despair and hope inhabit the same space.
Perhaps Denny Kandiyero’s description of the Harare property market as “steady” is a touch too sanguine. He has a three-bedroom middle-range house at Z$900 000 (R150 000), the same as it was a year ago. But the Zimbabwean dollar has lost a third of its buying power, therefore real prices have plummeted.
A house in the lower-range Masasa Park was Z$250 000 two years ago, now it is Z$500 000. “Steady” also means there are hardly any buyers or sellers around right now. But then Kandiyero’s website (www.zimbabwe.net/ business/property/krea/) announces his “optimistic approach, sincere commitment and dedication that has made Kandiyero Real Estate grow from strength to strength”.
Old Mutual Properties general manager Luke Ngwerume backs Kandiyero and describes the office and retail markets as stable. “Some voids [empty space] but nothing to be concerned about.” Landlords have been increasing rents each year by the inflation rate, now 50%, and tenants whose export income has stayed the same because of the controlled exchange rate are struggling. “They are using space less extravagantly,” Ngwerume adds.
The market is responding to economics rather than politics.
Pam Golding Properties (PGP) Harare CEO, Tracey Quincy, is proud that turnover for the six months to end February was Z$176- million or a little under R30-million. That’s 50 average four-bedroom Harare northern suburbs executive houses at Z$3,5- million (R600 000), or eight houses a month. Any self-respecting Durban or Cape Town agent might sniff at such turnover, but they don’t work the rough business landscape Quincy and Kandiyero do.
Hyperinflation encourages people to move out of money into hard assets and, at the beginning at least, to bank in land and get some store of value. Zimbabwean house sales averaged 1 000 a month last year, says local economist John Robertson, up from 800 the year before and 700 before that. Current figures are not yet available.
Mortgage interest rates are government controlled at a fixed rate, capped at between 18% and 28%, and that would be a great incentive to borrow as much as possible on a house. But mortgages are limited to a pool of long-standing bonds that pass from seller to buyer at fixed rates as low as 14%. Banks cannot raise new money at low enough rates to increase that pool.
Overdraft rates at 70% a year means that even with the standard 25% deposit the average executive would have to pay Z$150 000 (R26 000) a month. But that is impossible for the average executive. High inflation also stops sellers leaving their money in as loans to purchasers because they must either put it into a new home or place it where it will keep its real value. So they sell for cash or keep the house.
“The favourite place for surplus funds is the money market, where high interest rates help retain value,” says Robertson.
Quincy says recent sales have been almost exclusively to executives who are financed at low interest rates by their companies. Although she cannot confirm it, market talk is that sales to expatriate executives often gives the seller the opportunity to get some of the selling price paid offshore. It’s also a neat way for black money to come into the country at excellent rates.
“People are becoming more security conscious so clusters and gated developments are the most in demand,” Quincy points out. But little development takes place unless buyers order off-plan and accept a price that ratchets up with time and inflation. Builders who signed fixed-price contracts have gone bust. Robertson says architects and quantity surveyors have little to do.
What sets Zimbabwe apart from the South African property market is the stifling and time-consuming regulation of all transactions. You can’t transfer properties above a certain size without a Government Certificate of No Present Interest. The Compulsory Purchase Act applies to houses as well as farms. Rents and tenure are regulated. And, say observers, there is a less than subtle desire by magistrates, courts and authorities to follow political policy rather than the letter of the law.
Quincy tells of a recent property PGP sold in one of Harare’s better suburbs. The tenants refused to leave. The local magistrate would not evict them. Quincy advised the purchaser to move into the house anyway with the tenant in it.
“The tenants were a white family from South Africa,” says Quincy. “The buyer was a black Zimbabwean. We asked the tenants to make room for the owner. They moved out within 24 hours.”
Kandyero, Quincy and Ngwerume believe things will ease after the election late this month. Robertson forecasts a drop in the inflation rate to 40% next year.
But property ownership is now an issue in Southern Africa that will not go away. The disadvantaged will continue to want redress and the opportunity to develop the wealth that property brings. And some South African property owners will continue to have nightmares.