Earler today I read an article by Mail & Guardian journalist Jason Moyo about the high end property boom in Harare. This got me thinking, who exactly is Moyo writing for, because from my knowledge of the Zimbabwean economy and its unforgiving ways, the article seemed rather one-sided. What I found strange, amongst other things, was how the fund managers interviewed say they struggle to get information to clients in New York, this you have to take that with more than just a bucket of salt. The fact is the information is there, everywhere but they just can’t package it in a way traditional investors would understand, because they themselves don’t understand what’s going on. Zimbabwe has unique problems and opportunities that defy convention so a fund manager or stockbroker are possibly ill-placed to give a view of what’s actually happening on the ground. Their profession is also synonymous with every stock market crash and property bubble since the first crash and bubble so I tend to take what they say with skepticism. You’re better off talking to property agents, buyers and actual developers. A boom you say? I’d call it a bubble because it is not backed by clear economic and infrastructural fundamentals. As Moyo states in his title, this is being driven by the “Zim diaspora” who, aside from being originally from Zimbabwe are no different from other short term investors (read opportunists) looking for highly profitable areas to park their money. This housing “boom” is not backed by any sustainable upswing in economic activity but on the premise that this upswing is just around the corner. To paraphrase from a scene in Quentin Tarantino’s epic Kill Bill Volume 1, recovery is not a straight path, it is a forest. Diasporans will not save Zimbabwe, if they were going to, they would have done so already, they are investors first, with patriotism not exactly a major priority.
Zimbabwe is currently not making any new millionaires, officially anyway, as growth has been pedestrian the last two years after the initial hype of dollarization and the Global Political Aagreement GPA. Without tangible growth, where are the occupants of the plush new mansions going to come from? These developers are making investment decisions as they already own primary and secondary homes, possibly farms even. Once the buying spree doesn’t kick off as promised, expect a sell-off of note. Another thing is Harare is notorious for its poor water infrastructure, especially in Borrowdale, so how are the developers getting around this? Poor service delivery has added to the costs of residential developments in Borrowdale particularly and Harare in general for many years and has steadily gotten worse. Though this work is currently ongoing, it will take some years still to rectify this situation compounded by the unrelenting urban migration into the Sunshine City.
So a boom? I don’t think so, it will be interesting to see how large this bubble grows before it bursts and who it will take with. I sincerely hope it will deflate before then but if it doesn’t, thankfully this is funded mostly by off-shore money and the burst will have little effect on the national economy as the amount of local resources being allocated to this is minimal.
Here is a link to the Mail & Guardian article: http://mg.co.za/article/2013-04-19-zim-diaspora-drives-property-boom