Rental yields for Dawn Properties continue to fall

Rental yields for the Zimbabwe Stock Exchange-listed Dawn Properties continues to fall owing to inflation and depreciation of the local currency, the company revealed recently.

Dawn Properties has real estate businesses in Zimbabwe which include property holding, property development and property consulting.

The company’s managing director, Justin Dowa, in a latest trading update blamed the erosion of rentals revenue on the harsh operating environment.

 “Rental yields continue to fall as rent reviews lag behind inflation and the depreciation of the ZWL, while voids remain a big issue,” he bemoaned.

“The Property Management cluster continued to underperform as rent reviews failed to keep pace with inflation and exchange rate movements.”   

Dowa said declining disposable incomes, low capacity utilisation, the preference by property owners to transact in foreign currency has put downward pressure on both rents and property prices in real terms.

“The operating environment during the period under review continued to be challenging, characterised by foreign currency, electricity and fuel shortages as well as galloping inflation and diminishing real incomes,” he lamented.

“This situation was exacerbated by the effects of lockdowns and travel restrictions imposed by world governments following the advent of the COVID-19 pandemic. This further deepened the economic crisis afflicting an already poorly performing Zimbabwean economy. The International Monetary Fund estimates that effects of COVID-19 will result in Zimbabwe’s GDP shrinking by approximately 7.4%.”

Dawn Properties managing director said Property Consultancy revenue at ZWL9.5 million during the three-month period under review, registered a 70% growth from prior year driven by a better than expected performance from the Valuation and Advisory Services cluster. “The need for clients to revalue their asset balances in ZWL for year end reporting was a key factor in this performance,” highlighted Dowa.

He said it was difficult to estimate the full impact of the COVID-19 pandemic on the performance of the business for the remainder of the year as the situation remained fluid. “The group has put in place a survival plan and cash-flow requirements will be met with income generated from the Property Consultancy and Property Development operations,” he said.

“As a value preservation initiative, the group’s focus had started to shift to property development utilising its extensive land holdings. Rent income from the Hotel properties was largely deployed to fund this activity during Q1 2020.”