/ 30 March 2012

Cash-flush buyers fuel boom for new Harare mansions

While much of Zimbabwe’s economy thirsts for cash, the market for luxury homes is steaming.

Houses in Borrowdale Brooke, a wealthy suburb of Harare, have been advertised from $2.5-million to “just” $7.5-million.

These prices should look out of place in a country where no mortgages are offered and the economy appears to be stagnating — but estate agents say there is a lot of new money flowing into luxury homes.

“It is not unusual to get someone putting up a million and asking you to find a property. It’s a small minority but increasingly active,” said estate agent Pascal Farayi.

The increasing show of wealth in Harare’s northern suburbs highlights the widening gap between the cash-rich barons and the rest of the country. In Harare alone, at least three new enclaves for the wealthy are being developed and most of the plots are being snapped up for cash.

Diamond money going property
Much of the new money going into luxury property is thought to come from the diamond industry, a suspicion that grew after the head of a state mining company built a three-storey mansion in Harare a year ago.

But agents did not ask potential buyers where they get their cash from, Farayi said. “We are just here to sell.” When he offered a property for $900 000 this month, he received two cash offers — one from an Israeli national and another from a local.

Cash-rich buyers are now calling the shots in the market.

Foreign buyers taking bets on the economy turning the corner are also contributing to the boom in luxury homes, according to analysts Business Monitor International. Even though prices were inflated, there were signs of “a great deal of pent-up demand”, the group said.

“Many investors believe that property values will explode to the upside if and when a lasting political resolution is reached and therefore see it as an attractive investment opportunity.”

Lack of funding
Juliet Harris, head of Pam Golding Zimbabwe, said the lack of financing from banks kept much of the market depressed, which gave wealthy buyers more clout.

“We anticipate that this trend will continue for the … foreseeable future. As a result … there is now even greater resistance to overpriced properties … it is not the sellers or agents who are determining the selling price, but the buyers who have cash,” Harris said in a note to clients.

The boom has attracted South African property companies. Last year, property management company JHI entered the market, joining Re/Max, which has had a franchise in Zimbabwe for more than a year.

The Re/Max franchise has land on the market in a $250-million gated community called Beverly Hills Golf Estate. Buyers will be able to choose from 400 designs by South African architects Nico van der Muelen and Francois Marais.

The spurt in the construction of mansions in Harare may have contributed to the good results for South African cement-maker PPC, which said recently that Zimbabwe was the only one of its regional markets to register growth in sales.