Over half of Zimbabwean property owners have more than 80% of their net worth tied to property, compared to about 45% in the United States. This is a problem that can also have a damaging impact for businesses and in the long run for property owners.Here is what every property owner, investor and entrepreneur needs to know.
Thanks! We still need to get that appointment set up by the way!
Fully agree I think. There is a need for more capital. Venture Capital is great although wouldn't advocate for the US model. I think our markets not mature enough.
Beginning to look forward to seeing your name in the inbox!
Since we are not Zimbabwean we cannot be certain but are prepared to bet that an extremely high % of those whose net worth is tied to property is an investment in their own residence. Which means that if they approach a bank for a loan to fund a business venture the bank's are likely to want to security and usually that will then be provided by using the property (meaning that if the business fails the residential home is also at risk. And sales in execution notoriously deliver returns below the actual worth of the property. In SA a measure has been introduced to reduce the incidence of a debtor's residential property being sold at"bargain basement" prices.
But the real answer lies in the development of a true venture capital market and approach to financing (which doesn't exist in SA either). Venture Capital investors know that around 7/10 of investments will fail, 2 may come close to breaking even, and only 1 may earn enough to make up for all the losses incurred across the other investments.
South African's largely have a risk averse approach. In the USA and Canada investors seem more willing to take a chance - but then because they have numbers on their side they also tend
to make smaller individual investment but across many counters.
Is it possible in Zim at the moment to put policy that will redirect capital to other asset classes? Other asset classes require some level of trust with the government and that in Zim is very difficult to create, build or sustain. Until we can trust our own government the other asset classes may be doomed. Unless of course there is a way to create decentralized markets that people can trade on with minimal gvt intervention and has efficient liquidation methods.
I did some surface level research on Web 3 technologies and blockchain systems where tokenization may be a viable option to raise capital. I certainly would need to go a little deeper into it but it is 1 way of uncomplicating the trading in parts of a portfolio of real assets such as properties without having to offload the entire asset.
The odd thing is, with all this real estate development going on, the CBD has been largely abandoned with empty high rise office buildings.
Thanks to our vendor economy of course.
I wonder if all these malls and cluster homes will actually have high occupancy rates in a few years. Given the rapid pace of development. And rising unemployment.
Have we all noticed that companies are reducing their head counts.
I think Tinashe did highlight the dangers of such a boom in Real Estate development with no corresponding boom in investments in other asset classes. What tends to usually follow a boom cycle we all know is a bust! So unless a correlative approach is undertaken to channel investment across the productive, I.e. manufacturing, FMCG etc a crash is imminent on the back of the warning signs we are in fact seeing with company closures and or downsizing.
Very insightful article Tinashe, Thank you.Can we look at another perspective that reads the quantum of investment in real estate is a fair representation of its demand and function aspect.What is lacking is how that quantum figure ought to be leveraged through financial instruments to free up the "dead" capital as the bulk of real estate in Zim is not leveraged.Growing the financial tools that leverages this "dead" capital will get us relatively compare favourably with other countries like SA.
Thanks! We still need to get that appointment set up by the way!
Fully agree I think. There is a need for more capital. Venture Capital is great although wouldn't advocate for the US model. I think our markets not mature enough.
It needs to be more patient.
Beginning to look forward to seeing your name in the inbox!
Since we are not Zimbabwean we cannot be certain but are prepared to bet that an extremely high % of those whose net worth is tied to property is an investment in their own residence. Which means that if they approach a bank for a loan to fund a business venture the bank's are likely to want to security and usually that will then be provided by using the property (meaning that if the business fails the residential home is also at risk. And sales in execution notoriously deliver returns below the actual worth of the property. In SA a measure has been introduced to reduce the incidence of a debtor's residential property being sold at"bargain basement" prices.
But the real answer lies in the development of a true venture capital market and approach to financing (which doesn't exist in SA either). Venture Capital investors know that around 7/10 of investments will fail, 2 may come close to breaking even, and only 1 may earn enough to make up for all the losses incurred across the other investments.
South African's largely have a risk averse approach. In the USA and Canada investors seem more willing to take a chance - but then because they have numbers on their side they also tend
to make smaller individual investment but across many counters.
Keep well - looking forward to next Thursday
Is it possible in Zim at the moment to put policy that will redirect capital to other asset classes? Other asset classes require some level of trust with the government and that in Zim is very difficult to create, build or sustain. Until we can trust our own government the other asset classes may be doomed. Unless of course there is a way to create decentralized markets that people can trade on with minimal gvt intervention and has efficient liquidation methods.
True! It is really tough. The topic os trust is going to take a lot to get over.
Interesting idea on decentralized markets. Had never thought of that as an alternative.
I did some surface level research on Web 3 technologies and blockchain systems where tokenization may be a viable option to raise capital. I certainly would need to go a little deeper into it but it is 1 way of uncomplicating the trading in parts of a portfolio of real assets such as properties without having to offload the entire asset.
The odd thing is, with all this real estate development going on, the CBD has been largely abandoned with empty high rise office buildings.
Thanks to our vendor economy of course.
I wonder if all these malls and cluster homes will actually have high occupancy rates in a few years. Given the rapid pace of development. And rising unemployment.
Have we all noticed that companies are reducing their head counts.
I think Tinashe did highlight the dangers of such a boom in Real Estate development with no corresponding boom in investments in other asset classes. What tends to usually follow a boom cycle we all know is a bust! So unless a correlative approach is undertaken to channel investment across the productive, I.e. manufacturing, FMCG etc a crash is imminent on the back of the warning signs we are in fact seeing with company closures and or downsizing.
Very insightful article Tinashe, Thank you.Can we look at another perspective that reads the quantum of investment in real estate is a fair representation of its demand and function aspect.What is lacking is how that quantum figure ought to be leveraged through financial instruments to free up the "dead" capital as the bulk of real estate in Zim is not leveraged.Growing the financial tools that leverages this "dead" capital will get us relatively compare favourably with other countries like SA.
That's a good point probably worth another deep dive.
Why do you think that most property is not leveraged?
Is it banks not wanting to lend even when there is security?
Most banks aren't willing to give loans exceeding a 5 year tenure. Suppose they fear another conversation.
It's a tricky situation. There is a big need to gain certainty about the currency. People are still traumatised.
Thanks Tinashe, like the user above said, I too always look forward to seeing your posts.