Declining rentals hit landlords
Rental proceeds declined by half between 2014 and 2016, leaving many people who depended on renting out their houses worse off.
BY VICTORIA MTOMBA
The latest results from the Poverty Reduction Forum Trust’s (PRFT) Household Income and Expenditure analysis shows the decline has been witnessed in households that had been letting out their houses either partly or in full.
“The economic collapse and subsequent decline in housing rentals has plunged the medium class into poverty as most of their properties have been left unoccupied due to declining demand. The country is left with two classes, the elite group and the poor, with the latter being the largest constituency,” the report said.
“In a normal economy, the medium class should be seen contributing more to national savings which are essential for industrialisation and economic growth. More opportunities for home ownership in peri-urban areas have contributed to a decline in inner suburb rentals as supply is exceeding demand. Houses have ceased to provide a commensurate income due to demand linked devaluation.”
Labour and Economic Development Research Institute of Zimbabwe economist Prosper Chitambara said the findings were indicative of the state of the economy and the number of people losing their jobs in the formal market.
“Demand has gone down and it affects the rental income and affects the Gross Domestic Product, although the figures cannot be quantified. This means poverty will increase as it depends on what happens in the overall economy,” he said.
He added that going forward, poverty would increase further as the growth targets were expected to be in the negative until 2018. Chitambara said there was need to invest in agriculture infrastructure such as irrigation and equipment.
The PRFT report showed that urban and peri-urban areas have become a hub of informal income generating activities as economic opportunities in the formal sector continue to shrink. The country has witnessed more small informal businesses supplying the needs of the new urban and peri-urban settlements.
“The surveyed households reported operation of small informal business [18%] and vending [38%] as their major sources of livelihoods.”
The Zimstat 2014 Labour Force Survey showed a higher informal sector poverty prevalence rate of 78%, with 24% representing households in extreme poverty.
The report said people’s efforts and investments in the informal sector were yet to see them out of poverty and they faced challenges as the bulk were into retailing and not production. This made it difficult to integrate them into formal production, the report said.
Real Estate Institute of Zimbabwe president Siza Masuku said the poor demand and low disposable incomes for rented accommodation had caused landlords or property owners to renegotiate rent downwards in order to attract tenants.
“High voids in the market have also caused the lowering of rent levels as tenants have an abundance of properties to choose from, to address their occupancy needs. Another factor which is attributed to the decline in rental levels is the increase in the number of both formal and informal settlements in and around the city where occupiers are opting to build their own homes instead of renting or leasing,” he said.
He said property owners were advised to renovate or modernise their properties in order to attract potential occupiers and to offer concessionary rentals and other incentives to attract tenants like rent-free periods.
“Like the current challenges bedevilling the economy, landlords have limited options at the moment as their investments are not yielding any dividends, but will have to adjust their expectations in line with the prevailing deflationary environment,” Masuku said.