Housing Investment Landscapes in Zimbabwe
Introduction:
The political and economic instability of recent years in Zimbabwe has led to infrastructure and regulatory deficiencies, and the housing backlog is estimated to be 1.3 million units1 and growing. Although the financial sector remains well developed in comparison to some regional peers, the access to credit is still poor, with less than 3 percent of the working-age population having an outstanding home loan, compared to the broader SADC average of 5.7 percent. Foreign investment in the country is low, likely reflecting the uncertain economic outlook and perceived investment risk.
A large portion of the foreign inflows has come from the US, UK, or the African Development Bank. Of the small fraction of investments allocated to the housing sector, investors prefer to invest in equity or debt of the banks and building societies for financing mortgage lending. The new government has spoken of plans to alleviate the demand-side and supply-side obstacles to the provision of affordable housing, but international investors are likely to wait until there is clear evidence of improvements to the investment environment.
Profiles of investors:
The investment landscape in Zimbabwe constitutes both local and foreign institutional investors. Below is a description of the two categories of investors, including their institutional type, sources of capital, and other parameters that define their investment models.
Local institutional investors:
Capital markets:
The Zimbabwe Stock Exchange (ZSE) lists 62 equities, and its principal role is facilitating long-term capital raising for companies, government and quasi-government institutions. However, trading has been extremely thin in recent years, reaching a low in 2016, with annual market turnover of just US$194 million. This improved significantly in 2017 to US$695 million, the highest level post dollarisation. In 2017, the ZSE re-introduced listing of debt securities for the first time in 20 years. Five banks are listed on the exchange – Barclays Zimbabwe, CBZ Holdings, FBC Holdings, NMBZ Holdings, and ZB Financial Holdings – as well as microfinance lender Get Bucks.
Pension Funds:
Pension funds play a significant role in Zimbabwe as a source of financing for the economy through long-term investments. Unfortunately, the pension schemes in Zimbabwe are not significantly invested in the affordable housing sector. The National Pension Scheme, operated by the National Social Security Authority (NSSA), has a large number of investment properties, but almost all of these are commercial properties. Further, the residential properties that are in the portfolio are luxury high end accommodation, such as Ballantyne Park in North Harare. The NSSA holds equity stakes in two of the three biggest mortgage lenders in the country, a US$47 million holding in FBC Bank and an US$11 million (16 percent) holding in the country’s largest bank by assets, CBZ Bank. The government also has a 16 percent stake in CBZ Bank.
Foreign Institutional Investors:
DFI Investment:
In general, Zimbabwe has received little investment from overseas in recent years, perhaps because of political instability and the recent currency debasement. Exceptions are the large inflows from China, whose companies5 have invested US$8.5 billion in Zimbabwe since 2012. However, all of this has come in the commercial sector, with 95 percent allocated to the energy and transport sectors. Most investments in the financial sector have been in the form of providing finance to the local banks. The largest single investment has been a US$75 million loan to FBC Bank by Afriexim bank, a multilateral lending institution headquartered in Egypt and funded largely by African governments and African private and institutional investors. Beyond this, there have been investments by DFIs in Tunisia (US$36 million by Shelter Afrique), the USA (US$20 million by OPIC), and the Netherlands (US$18 million by FMO).
The Breadth and Depth of Housing and Housing Finance Products:
The leading mortgage providers have been Central African Building Society, CBZ Bank, FBC Bank, and ZB Building Society, with a combined mortgage book of US$366 million11 in 2016. This is roughly one tenth of the country’s total loans. This figure compares to US$167 million in 2011, showing an annual growth rate of 17 percent over five years. National Building Society, set up in 2016, has become a significant player as well, leapfrogging ZB’s mortgage book in 2017. The Reserve Bank of Zimbabwe has predicted US$356 million of gross mortgage advances in 2018, funding 11 700 units. Despite this optimism, the two largest mortgage lenders saw disappointing net mortgage advances in 2017: Central African Building Society’s housing book grew just 3 percent from US$194 million in 2016 to US$199 million in 2017, while CBZ’s mortgage book shrunk -22 percent from US$107 million in 2016 to US$83 million in 2017.
Housing Output:
Reducing the national housing backlog, estimated to be 1.3 million and growing, is urgent. With foreign investors showing reluctance to commit to long-term investments, it has been the local banks that have made the most concerted efforts to construct affordable housing. The National Building Society announced in 2017 its intention to construct more than 14 600 low-cost houses in Bulawayo and Harare. These projects include developments in Derbyshire, Harare (1 010 units); Caledonia, Harare (8 000 units); Emganwini, Bulawayo (800 units); and National University of Science and Technology Student Accommodation (4 800 units). The first low-cost housing scheme was launched in April 2017 in Chihonyi in northern Zimbabwe, consisting of 723 units.
Conclusion:
So far, the little investment that there has been into the housing sector has come indirectly, through bank financing. While the last five years have seen an average 17 percent a year growth in mortgage lending, the most recent data suggests that the rate of growth is decelerating. RBZ data shows that 2016 total building society loan growth slowed to 4 percent from averaging 30 percent a year for the period 2011-2015. This is despite the entry of the National Building Society midway through 2016. Even with “deliberate consented effort from the public and private sector, a 15 to 20-year period would be required” to clear the substantial housing backlog.