THE use of free funds has paid off for the residential property sector as the freehold sales sub-market experienced the most notable activity in the last quarter of 2020.
This is despite the property market fundamentals remaining depressed due to the difficult macro-economic climate and low business confidence.
Through Statutory Instrument 85 of 2020, the government allowed sellers and service providers to freely market their goods and services, and transact in the US dollar currency.
While it has been termed “dollarisation through the back door” it has seen residential rentals being charged in US dollars across the board. In a third-quarter trading update, Masholdings Limited MD Gibson Mapfidza said in the occupier sub-market most tenants were able to pay-up the rent arrears that were deferred during the lockdown period.
“This propelled the sub-market, which had earlier in the year suffered lethargic rental growth and rent payment deferments. Inflation however remained significantly high and, as such, the asset class failed to hedge against time value losses. In the property market, the freehold sales sub-market experienced the most notable activity mainly concentrated in the residential sector,” he said.
During the period the occupier sub-market was affected by low demand for office space; this, in turn, had an impact on development activity.
The limited development activity and sales transactions on the market also remained concentrated in the residential sector.
For Masholdings, the property investment portfolio value remained at an inflation-adjusted valuation of ZW$10 billion determined from the last valuation performed as at 30 September 2020.
Rental income increased by 47.6% compared to the same period last year driven by quarterly rent reviews which the business has been performing in line with market practice.
Mapfidza said the improved revenue performance was also driven by new leases concluded during the quarter.
“Occupancy levels have increased from 77.7% to 79.4%. Operating profit increased by 18.9% due to the revenue growth, the operating profit margin however decreased by 19.5% due to an increase in total operating expenses. Operating expenses increased by 59% to ZW$30.7 million driven by movement in unofficial market exchange rates which had a bearing on the Zimbabwean dollar value of materials and services consumed by the company. Service providers have continued tracking premium exchange rates in the pricing of products and services to hedge against inflation,” he said.
Looking forward, Mapfidza said while the economic outlook for the rest of the financial year into 2021 remains uncertain due to the persisting economic conditions which have been exacerbated by the second wave of the Covid-19 pandemic, the company will continue to preserve value by pursuing its property development projects in line with the broader company strategy while continuing with efforts to retain existing tenants and secure new leases to sustain overall business performance.