Property sector default rate between 30-40%

Published: 06 May 2014

The country's property sector continued to be depressed in the first quarter as the effects of the liquidity crunch continue to bear down on prices and the quality of tenants.

However, the situation is likely to improve in the second quarter as stakeholders have started to put in place measures to curb the problem.

Default rates and voids have been increasing since 2012 and market watchers believe the problem has been worsened by companies and individuals' limited cash flows. Estate Agents Council chairman Oswald Nyakunika said the default rate in the first quarter remained high at between 30 to 40 percent.

"However the trend shows the situation has started to improve as Estate agents are working together, in selection of tenants and making sure the bad apples are blacklisted. Suffice to say the current situation is a reflection of the harsh economic times we all going through," he said.

He said the void rates in the first quarter stood at 20 percent. Nyakunika said the high void rate was a reflection of the high default rates and subsequent legal handover and evictions still prevalent.

"We panic because this is new a new phenomena to us but the swings of highs and lows are expected in the more industrialized and developed economies. There is no doubt the issue of cash and liquidity crisis needs to be addressed if we are to come out of the current situation," he said.

He added that lack of financing had resulted in high property prices.

"The lack of mortgage lending had also negatively affected property sales and prices. The economy cannot operate on cash basis hence the current gloom in the sector," he said.

Prices of property have been high as most buyers fail to pay the cash demanded by property owners since mortage finance is limited.

A report released by Knight Frank in January said borrowers are expected to repay within 10 years, in contrast to 25 to 30 years in some markets resulting in a ballooning backlog, with 1,3 million people awaiting access to housing.
- BH24

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