Zimbabwe has a promising housing finance sector. As the mortgage market does not yet meet the breadth of the population who might afford a mortgage, most households still finance their housing independently, with savings or non-mortgage credit.
The lowest recorded interest rate on a mortgage in Zimbabwe is 9.5 percent, as of September 2016, and requires at least a 15 percent down payment. The cheapest newly built house by a developer recorded by CAHF is US$ 18 000, which is for a 30 square metre unit). Cement prices are higher than the continental average, at US$ 13 for a 50-kilogram bag.
With an urbanisation rate of 1.93 percent, demand for affordable housing will remain strong, both for rental and purchase. Housing microfinance will play an important role in increasing the supply of housing, and efforts to increase access should be undertaken. In response to these difficult conditions, many firms have sought different, innovative approaches. An example is that some organisations have shifted their work to developing serviced stands and providing credit for households to purchase them, creating opportunities for households to incrementally construct their own housing. There is a strong interest in the market by local players, demonstrated by the number of Zimbabwean members of the African Union for Housing Finance. With a good macroeconomic environment, sound policy, better data and increased access to affordable credit, an enabled housing market can increasingly provide housing that the average household in COUNTRY can afford.
Find out more information on the housing finance sector of Zimbabwe, including key stakeholders, important policies and housing affordability:
- Access to Finance
- Housing Affordability
- Housing Supply
- Property Markets
- Housing Policy and Regulations
- Housing Sector Opportunities
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2017 edition, which has up-to-date profiles for 54 African countries.Download yearbook
Following Zimbabwe’s successful clearance of arrears to the various international financial institutions including the African Development Bank (AfDB), the World Bank and the European Investment Bank (EIB) in October 2016, Zimbabwe was removed from the International Monetary fund’s remedial measures. After 16 years of battling with a ballooning external debt this development is anticipated to garner positive effects particularly through attracting foreign investment and reducing the country risk.
In 2016 the IMF had projected Zimbabwe’s gross domestic product (GDP) to contract to -2.5 percent. That figure was then revised upwards to a positive growth of 2 percent. The World Bank Economic Prospects report and the 2017 national Budget had forecasts of 3.8 and 3.7 percent respectively. The government cited the firming of metal prices as well as the good 2016/2017 agricultural season to support the latest forecast.
However, the country’s inflation which was pegged at 0.21 percent in March 2017 is expected by the IMF to be at 5 percent by the close of the year. This will be the highest annual average since Zimbabwe adopted the US Dollar in 2009. The bond notes that were introduced in the last quarter of 2016 as a means to address liquidity challenges have worsened the otherwise positive outlook. The Bond notes were backed by a US$200 million loan facility by the Afrexim Bank was meant to have perfect (1:1) convertibility to the United States dollar. However, fears that a currency which can only trade inside the Zimbabwean borders would sooner or later lose a real market value materialized as Zimbabwe remains a gross import destination due to the contracting industrial and manufacturing sector growth. The Reserve Bank of Zimbabwe (RBZ) deputy governor Dr. Kupikile Mlambo acknowledged that the United States dollars are attracting a premium against the bond notes. Further to that, the bond notes have not been successful in easing liquidity challenges as banking queues have already resurfaced. Withdrawal limits have been reduced to different percentages by the various banks. In under 6 months, banks have run dry and frequently do not have cash to give to depositirs, in either US dollars or in bond notes.
The double-digit lending rates continue to constrain economic recovery. , Zimbabwe still experiences a structural regression, with acceleration of de-industrialisation and economic informalisation. These challenges are caused by difficult economic problems, including infrastructure and regulatory deficiencies, policy uncertainty, and insufficient formal employment.. The inflation rate which up to May 2016 remained negative, reaching 1.69 percent, this year stood at 0.75 percent in the same period.
Access to Finance
Despite challenges in the operating environment, the Zimbabwean financial sector remains well developed and sophisticated. As at 30 June 2017, there were 20 operating banking institutions including the central bank, thirteen commercial banks, one merchant bank, four building societies (the country’s major source of housing finance) and one savings bank. The last updated records by the RBZ indicate that the country has 16 asset management companies and 163 microfinance institutions. A Malawian Bank, First Merchant Bank acquired Barclays Bank, one of Zimbabwe’s oldest and largest banks. The signing over of the majority stake was sped up amid fears of objections and interdicts. The Affirmative Action Group (AAG) President is on record stating his organisations’ intention to reverse the acquisition highlighting that local companies were not given preference to the sale. National Building Society (NBS) was Zimbabwe’s newest building society, operational since May 2016 with an initial capital of US$25 million. NBS has remained an early market leader with the lowest mortgage lending rate of 9.5 percent and the longest tenure of up to 25 years[i]. The NBS’s traditional mortgage requires the property as surety and its building loan is only offered for serviced stands to build a habitable structure. Credit risk has been a key component of the profile of banking institutions; however, the ratio of non-performing loans (NPL) to total loans continued to decline up till the end of 2016 to 7.87 percent from 10.87 in the beginning of 2016, and down from a peak of 20.45 in 2014. Mr Patrick Takawira , the Executive Director of Tresury at FBC Bank, one of Zimbabwe’s leading Banks said that most banks were to blame for the rise in bad loans due to poor risk credit assessment on borrowers. The RBZ governor, Dr. Mangudya said the notable decline can be directly attributed to the apex of bank’s policies and measures including an enhanced credit management system and collection efforts and disposal of qualifying NPL’s to the Zimbabwe Asset Management Company (ZAMCO). Austere collections and workout plans also helped alleviate the rate of NPLs in the banking sector. ZAMCO’s positive effect is still expected to lower funding cost which, in tandem, translates into reduced lending rates. However there is still lack of cohesion between this and other regulatory realities including that the borrowing cost is a major factor in the housing sector’s costs and competitiveness
The World Bank Doing Business report notes that Zimbabwe has this year dropped 4 places down in the Ease of Doing Business to position 161 out of 190 countries. The World Bank introduced a new ranking called the Distance to Frontier (DTF), in which the value zero (0) represents the lowest performance by an economy and 100 being the frontier. In this aggregate, Zimbabwe is ranked 47.1 below the Regional Average of 49.51.
Mortgage lending remains largely undertaken by the Central African Building Society (CABS), CBZ Bank, FBC Bank and ZB Building Society. New mortgage lenders include more traditional institutions: People’s Own Savings Bank (POSB); Stanbic Bank and Barclays Bank. Mortgage lending rates retained their range of 15-20 percent with NBS’ maintaining its flexibility in the mortgage lending thresholds. As the traditional leader, CABS continues to require 10 percent of the property value as deposit, in addition to 10 percent of the value paid towards property transfer fees. Stanbic Bank also retained its requirement of exclusive banking for a minimum of 12 months, 5 percent of the property value and 5 percent for property transfer fees.
The RBZ 2016-2020 financial inclusion strategy still hinges on targeting priority areas and specific strategic measures. The establishment of the additional banking class (deposit-taking microfinance institutions dedicated to supporting Micro, Small and Medium Enterprises [SMME]), is still in play although no further announcements have been to the current status of the strategy.
Since being implemented in January 2015, the government continues to waive stamp duty on cession of mortgage bonds in order to incentivise provison for additional mortgages. There appears to be no data or information regardig the progress on this incentive.
Lending in the Banking sector still remains short term as the rate of demand deposits rose before and after the introduction of bond notes. The public concerns that the introduction of bond notes will bring back inflation, as the economy moved from little or no inflation since dollarization to a current 0.58 percent as at May 2017, and projected to 5 percent by the end of 2017. Transferable demand deposits grew by a further 27.85 percent from 52.9 percent last year. The liquidity crunch that subdued a few months after the introduction of bond notes has reemerged and perhaps worsened. A consultant and economist with the Office of the president and Cabinet cited the huge monthly government wage payments (in excess of US$200 million) as the single largest contributing factor towards the growing imbalance between bank deposits and real cash
Limited availability of affordable long-term finance impacts negatively on the ability of mortgage lenders to provide affordable mortgages; as such, lenders pass high borrowing cost to customers. To counter liquidity shortages and to move Zimbabwe towards a cashless society, government has encouraged the banks to continue to reduce transactional fees for debit card usage.
“ The reduction of such charges will have a ripple effect on the transactional, precautionary and speculative demand for hard cash.” Said Vice President Emmerson Munangagwa at the Buy Zimbabwe 7th Buy Local Summit and Investment Forum in Victoria Falls.
In Zimbabwe, Point of Sale (POS) volumes via mobile money increased by 400 percent in April 2016 and by 260 percent within the same period in 2017.. Similar to last year, mobile money transactions unfortunately, remain largely cash based and are not valid as a platform for savings and credit. Mobile money does not provide historical data needed to acquire loans or other banking opportunities, a limitation that continues to impede an individual’s access to housing finance.
Zimbabwe has seen an increase in access and affordability of housing finance. Although, credit risk is taken into account by housing finance lenders, the interest rates for most borrowers remain unchanged with 8-16 percent per annum for regular borrowers, 6-0 percent per annum for prime borrowers with low credit risk, and 10-18 percent per annum for borrowers with high credit risk.
To enable low-income earners to access housing finance, building societies collaborate with employers for loans at subsidised rates Another novel approach used by banks to bring affordable housing to low income earners include partnerships between the banks and City councils. The land is either given cheaply to the bank that will act as developer and a percentage split of profits is arranged between the City Council and the Bank. This is the same model that was used by CABS to fund the Budiriro housing project. A similar model was mooted between FBC Bank and Bulawayo City Council. However the City rejected the bank’s proposal to ease the City’s housing backlog. CBZ continues to offer the CashPlus Accounts that includes the CashPlus Housing account targeting the informal sector. This CBZ account allows clients to save money towards home financing, which is matched by the bank. Repayment is pegged over a term of between two and 10 years. Some microfinance institutions, including Homelink (requires collateral) and Untu, provide loan products for new home seekers and other products for home improvements. Microfinance loans run over a shorter term in comparison to banks.
With a significant number of Zimbabweans either unemployed or on reduced salaries, the number of qualifying loans is significantly reduced. Even though mortgage loan repayments are usually marginally lower than rental of a similar property, the application guidelines preclude the majority of Zimbabweans by conditions such as 12 months’ continuous employment.
Continued cash shortages, make Zimbabwe’s economy to remain fragile and contracted. The economic contraction is still contributin to increased job losses and further erotion of disposable incomes, resulting in further increases in poverty; this continues to affect affordability of housing finance as well as the housing itself.
In late 2012, Harare City Council signed an agreement with CABS to build 3,102 core houses for low-income earners in Budiriro, Harare. Beneficiaries needed an initial deposit and CABS provided mortgage finance, repayable over 15 years. Although this particular housing project is one of the first to specifically target low-income earners, it has been criticized because the minimum requirements are still beyond the reach of that income bracket. The project was commissioned in 2014 as part of the government’s concerted effort to meet the Zimbabwe Agenda for Socio Economic Transformation (ZIMASSET) housing target of 105 935 by 2018. To date CABS has managed to complete 2879 core houses but has only achieved an uptake of 800 units. The initial deposit requirement was slashed by 50 percent in 2015, and later completely removed in 2016 yet uptake has not improved. Peter Moyo, the councilor for Rugare argued that the houses were too expensive for the targeted population especially taking into consideration that the land was sold at a very cheap price of US$0.50 per square meter to CABS. Harare City councilors advised CABS to revise the prices downwards. .
Most banks are still lending to qualified low-income earners (earning $750 per month) for mortgages between US$15 000 and US$20 000. While it is laudable ,the threshold for qualification is significantly above earnings of most industry and commerce workers, and those in government service[i], especially when considering that the cheapest newly built house costs a minimum of US$15 000. The reality on the ground remains that even those in formal employment for a decade or more can no longer afford basic houses, partly due to savings depletion after successive currency regimes leading to the dollarisation in 2009.
Zimbabwe’s national strategy, the Medium Term Plan (2011-2015), had as its major objective elimination of the housing backlog and halving of the housing dependency ratio at household level by 2015. ZIMASSET also cites housing provision as one of its core mandates by 2018. The ZIMASSET plan projected to achieve 105 935 new housing units between 2013 and 2018. Some reports indicate that certain regions had reached the ZIMASSET housing targets. The Midland region is reported to have surpassed the ZIMASSET housing target when 50 000 home seekers received serviced stand which they could start construction on. However, by and large, the ZIMASSET housing target cannot realistically be met within the 2018 timeframe given.
Government continues its efforts to play a pivotal role in housing development through direct provision of houses, legislation and land. This is a daunting challenge considering that the current national housing waiting list still remains at an estimated 1.25 million..[i] Last year the national Housing Minister appointed a new board for urban development with “three main functions, which include urban development, with emphasis on housing provision in a manner that creates sustainable urban settlement, provision of audit services and training of local authorities”.[ii]
Several new Sino-Zim projects under the Build, Operate and Transfer (BOT) loan facilities that were touted last year may have stalled, as there has been no updates availed regarding the projects. Also, In January 2017, the National Building Society (NBS), was reported to be ready to roll out 10 000 housing units in 2017 alone, however no further details are available.
According to the Zimbabwe National Association of Housing Cooperatives (ZINAHCO), an apex body representing housing co-operatives, its membership serviced morethan 20 000 stands and built more than 10 o00 houses since 2000[iii]. Many housing cooperatives were being registered and delivering housing developments in line with ZIMASSET goals. However, the threat from such institutions is issuing of fake land allocation and distribution, which has led to extortion of and losses by home seekers.
The City Council system remains a challenge, as backlogs and red tape compromise the service. In April 2016, following a review of its housing policy, the Harare City Council banned housing cooperatives from occupying any new state land as a means to streamline housing development and better manage waiting lists and backlogs.. As of May 2017, a large number of housing cooperatives are still selling land, a clear sign that they had acquired vast tracts of land before the interdict was given giving the ban little or no effect in the short term. Courts are still inundated with cases regarding land disputes between home seekers and Cooperatives.
A report given by a researcher at the Real Estate Institute of Zimbabwe, Francis Chinjeruke, in December 2016 cast a gloomy outlook on the property sector based on market performance in 2016 and projections into 2017. Rental defaults and late payments increased to between 30 and 40 percent over the 18 months preceding December 2016. Rental costs also decrease between 20 and 30 percent over the same period to underscore the effects of a contracting economy on the property market.
The most notable trends include vacation of expensive properties as well negotiations for downward review primarily informed by prevailing negative developments in the economic environment such as retrenchments, downsizing and closures of companies. For the same reasons, commercial and industrial properties are the most affected with low uptake of tenancy.
Developments of informal settlements like Caledonia, Hopley, Stoneridge and Southlea have become popular residential options by default as home seekers can set up temporary structures without worrying about high rentals or stringent regulations by city authorities. This land was allocated over different periods of time since 2012 by the government under a host of programmes. There has not been any development done in these areas and they still resemble all the marks of informal settlements.
Property firms have adjusted to the economic downturn by creating what they perceive to be more economically viable packages. A standard package for a 2000 square meter residential stand has beed adjusted to $10 000, requiring a 20 percent deposit and monthly instalments averaging $200. Despite these attractive packages, however, declining aggregate demand, high financing costs and high qualifying threshold for mortgages remain a challenge,
Washington Musiiwa, a property analysts cited access to finance and to land as the two challenges faced by property developers. Traditional financiers have not been lending to private property developers with some building societies opting to fund their own housing projects. When financing is availed, the interest rates are too high which inadvertently pushes property prices upwards.
As at May 21, default rates on rentals stood at between 45 and 55 percent across the country as the downward trends noted in 2016 continue to slow the property market in 2017. Landlords no longer demand cash for rental payments; mobile money and bank transfers have become widely acceptable.
Housing Policy and Regulations
A strong institutional and regulatory framework shapes the housing sector in Zimbabwe. Many Acts and instruments remain unchanged in recent history; they are mostly progressive and include the Regional, Town and Country Planning Act [Chapter 29:12]; Urban Councils Act [Chapter 29:15]; Land Survey Act [Chapter 27:06]; Deeds Registry Act [Chapter 20:05]; Consolidated Land Acquisition Act [Chapter 20:10]; Rural Land Occupiers Act of 2002; the National Housing Policy of 2012; and Model Building By-laws. Some analysts observe that major challenges in the sector possibly stem from inadequate institutional capacity to support the effectiveness of these laws. For instance, the 1.5 million housing waiting list is cited as inaccurate as it does not adequately capture the deficit; officials also cite the roll as susceptible to duplication as well as manipulation.
Several laws also suffer the retrogression of not being retrospective in application. The government appreciated the importance of decongesting the urban areas and demand for housing therein through Acts aligned with the Peri-Urban Settlement (GoZ 1998). This was aimed at augmenting residential and industrial infrastructure in zones called growth points. However, development at growth points has stagnated due to economic regression, and new laws are not taking cognisance of the gap that developed when targeted growth in these peri-urban centres was not achieved.
Further long-term funding to address infrastructure bottlenecks is needed for effective housing delivery, including additional capacity to avail loans for both land and housing development. The Deed Registries Act [Chapter 20: 05] targets the issue of loan security and provides for the registration of mortgage bonds and notarial bonds. This provides security in the housing finance sector.
Housing Sector Opportunities
Investment opportunities in Zimbabwe are still replete, banking more than anything on human capital. Zimbabwe must weather yet another storm in the wake of resurgent political and economic unrest fueled by incongruent government policies.
The mayor of Harare, Dr. Bernard Manyenyeni said that the city had advanced plans to raise a $100 million bond towards housing construction. The move will go a long way in reducing the housing backlog as well as accommodating for the 1.6 million people dwelling within the city limits of Harare as well as the 2.8 million in the greater metropolitan area.
The optimism that surrounded the initial indications for investment by Aliko Dangote, particularly in the cement and power generation industries has waned off after a prolonged period of lack of material investment. After initial surveys by a team of experts and several agreement signings, no further engagement of the high profile prospect was noted.
2018 is an election year; history holds it that economic activity is repressed in periods leading up to the elections, but always rebounds after regardless of the outcome in the polls.