The Russians have landed

Written by Martin

Wednesday, 26 November 2008 12:41

Residential property investors from Russia and South Africa are snapping up houses in the world's economic basket case, says Andrew Golding

Residential property investors from Russia have been snapping up houses in Zimbabwe, probably the most troubled economy in the world.

As hyperinflation reaches unbelievable percentages in the millions and the local currency crashes to levels that have left high-flying corporates earning the equivalent of an astonishing US$5 a month and less, some adventurous property buyers have been scouting around Harare for deals.

This was revealed on by Dr Andrew Golding, chief executive officer of the Pam Golding Property (PGP) group at his annual presentation to the media in Cape Town.

He said that he expects volumes for his group to be down by about 20% for the financial year ending in February, and that figures within his organisation suggest South African house prices have dropped about 10% in nominal terms since the last quarter of 2007.

Buyers are now scarce thanks to the huge difficulty buyers have in obtaining mortgage finance, he said.

An exception is the super-prime market above R20m where buyers pay cash. "In thin trading, these properties appear to be priced more relative to a worldwide comparison for a similar property," said Golding.

The PGP group has a strong presence in Zimbabwe, where its agents report that the market "relatively buoyant in recent months" has turned from a sellers' to a buyers' market.

"Property here, however, is still seen as an important form of investment, with high interest especially among South Africans, as well as Russian buyers."

He said buyers in Zimbabwe were generally seeking investments in the US$200 000 to $450 000 (about R2m to R4m) in the residential market, and from $450 000 upwards in the commercial sector.

In Zimbabwe, property has proved to be a good store of value as have stock market shares while inflation steadily pushes up prices of goods and services by the hour.

That is, said Golding, until recently. He attributed the change in market conditions largely to the faltering political negotiations.

Despite a farcical election process, Robert Mugabe has been calling the shots in Zimbabwe and refusing to share power with opposition leader Morgan Tsvangirai.

In the meantime, the business sector has imploded. Shops, empty for months, have closed down and Zimbabweans are battling to access their money in banks. Starvation and outbreaks of deadly diseases like cholera are now the big worries as Zimbabweans pin their hopes on a major shift in the political landscape.

Estate agents are harrassed regularly by the authorities who suspect many properties are changing hands for foreign currency - technically illegal although many in the population are surviving on US dollars and rands.

Golding told Realestateweb that there's a genre of investors who will potentially take an alternative view on property because potentially high rewards come with high risks.

His organisation has received calls from investors in the US and elsewhere wanting more information on the risks in Zimbabwe.

Golding said many South African business operators are also keeping a close watch on Zimbabwean developments and are planning to enter the market. When the Zimbabwean situation turns, as it ultimately must even if that time is still some way off, the world is expect to inject money into the country to help pick it up.

When that happens, there should be a "natural spin-off" in the property sector is the thinking of these investors, he said.

Other African countries where South Africans have been snapping up properties include Mozambique, Mauritius and Seychelles.

After Mauritius opened its doors to foreign investors, initially most buyers were from France and the United Kingdom, but this has changed - with more than 80% of buyers now from South Africa, he said.

Buyers in Mauritius are interested in commercial as well as residential property, said Golding.

Jackie Cameron
18 November 2008

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