While Zimbabwe’s economy has recovered since the initiation of inclusive governance in 2009, sustaining the growth has been difficult, given policy inconsistencies and political uncertainty. Economic empowerment programmes and dilapidated infrastructure (including frequent power outages) are seen as restraining the economy. Real GDP decreased to 6.8 percent in 2011, from nine percent in 2010 and is predicted to decrease further to 4.4 percent 2012.  Recovery is only expected in 2013, with a moderate increase to 5.5 percent. Zimbabwe’s economy continues to be stimulated by agriculture, mining, manufacturing and transport sectors.   Month on month inflation has been declining since February this year, from 0.19 percent in April 2012 to 0.07 percent in May 2012. This is a major improvement from 2008/2009 when inflation peaked at 6.5 sextillion percent in mid-November 2008.

The mid-term policy statement from the Reserve Bank of Zimbabwe reports that the multi-currency era has not seen the level of economic stabilisation expected: transitory deposits in the banking sector, short term loans, market illiquidity and a lack of money market instruments continue to constrain the economy.  The Reserve Bank is further worried about an increase in cash-based transactions, financial disintermediation, settlement risk and asset quality vulnerability.  The Reserve Bank estimates that US$ 2 billion is circulating outside the formal banking system to finance transactions in the informal sector.

Access to finance

Zimbabwe has a highly developed financial system.  As at June 2012, there were 25 banking institutions (18 commercial banks, two merchant banks, 4 building societies and one savings bank), 16 asset management companies, and 172 microfinance institutions under supervision of the Reserve Bank. It is estimated that 70 percent of the population does not have access to banking services.  In response, mobile banking products have been introduced to increase accessibility.

In 2012, the World Bank launched the Global Financial Inclusion (Global Findex) Database, exploring levels of financial inclusion around the world.  According to Findex, 40.3 percent of rural, and 37.8 percent of urban Zimbabweans over 15 years of age have an account with a formal financial institution.  This concurs wit FinScope Zimbabwe (2011) which found that 38 percent of the population is formally served. Credit is quite common: 65.7 percent of adults over 25 years of age report that they had a loan in the past year to 2011; however FinScope found that savings and transactional banking was more common.  The majority of these loans were from family or friends, and 14.7 percent were through a store.  Only 7.1 percent of adults had a loan from a financial institution and only 4.2 percent had a loan from a private lender.  Very few Zimbabweans have an outstanding loan to purchase a home: one percent of the top 60 percent of income earners and 0.6 percent of the bottom 40 percent of income earners.  Loans for home construction are somewhat more prevalent: 4.4 percent of the top 60 percent of income earners had one, and 2.5 percent of the bottom 40 percent of income earners.  FinScope found, however, that of the 31 percent of Zimbabweans that save their money, 10 percent were saving for the purchase or construction of a home.

Housing finance in Zimbabwe had a strong tradition of financing through building societies including the Central African Building Society (CABS) (now part of the Old Mutual group), Commercial Bank of Zimbabwe (CBZ) Building Society (formerly Beverley Building Society), FBC (formerly Zimbabwe Building Society) and ZB Building Society (formerly Intermarket Building Society) although the commercial banking sector formerly also offered mortgages. Building societies had also captured the largest share of deposits in the country exceeding commercial banks and even the POSB. Access to housing finance was generally confined to the middle- to higher-income earners through these building societies and banks. Nevertheless some, including CBZ had begun to make inroads into lower-income segments. Some building societies rather than engaging in their core business of providing loans were providing only short-term credit for a couple of weeks. Appetite for borrowing had also become subdued because of high inflation and interest rates.

The Central African Building Society (CABS) is the leading mortgage financier in Zimbabwe, followed by CBZ Bank.  The housing finance sector continues to experience liquidity constraints due to low investment and low deposit levels in the banking sector.  Only 7.3 percent of credit in 2012 was for mortgage loans. Still, the sector is slowly recovering from some very dry years.  CABS resumed mortgage lending in 2010 with 653 mortgage loans comprising a book value of US$15,9 million.  By 2011, this had grown to 1 468 loans, with a total value outstanding of US$73,1 million, and by August 2012, the total value of loans outstanding was US$88,8 million, involving 1 737 mortgage loans.  This comprises 23 percent of CABS’ current business.  Mortgage loans are charged at 15 percent variable interest over 10 years, with a 75 percent loan to value and 25 percent repayment to income.    In 2012, CABS secured a ten-year line of credit from Shelter Afrique to grow its business.

CBZ bank also offers mortgage finance and by June 2012, had dispersed a total of US$ 71 938 200 to its customers. Collateral mortgage bonds were US$ 516 256 377 and mortgage financing was US$ 112 375 971.2012.  CBZ offers a security that allows holders to access excess cash flows from securitized mortgage loan pools – this was valued at US$ 2 361 179 in June 2012.  BBS saw its mortgage book grow by 35 percent in the year to December 2011, from US$ 3.3 million to US$ 4.5 million.

ZB Building Society relies entirely on mortgage lending for its business.  As of August 2012, it had a total of 91 mortgage loans, at a value of US$6,28 million.  ZB Building society offers two employer-supported mortgage loans, at fixed rates of 5 and 10 percent over a term agreed between the lender and the borrower.  The maximum loan to value is 75 percent and payment to income is limited to 25 percent.  In addition, a two-year refinance loan is available at 18 percent.

Total credit provided by the financial sector was US$ 3.27 billion as at 30 June 2012 – based largely on short term credit. Commercial banks were responsible for the majority of this lending: 82 percent, amounting to US$2,7 billion.  Building societies had a 10.59 percent market share, amounting to US$346 million. The vast majority of banking sector lending (68 percent) was fairly equally spread across the services, manufacturing and agriculture sectors, and to individuals.  Construction commanded only 4.35 percent of this credit. This suggests that new-build, or construction finance, is very limited.  It is possible that the 18 percent of total credit that was taken by individuals may have been invested in independent home improvements – although this is not specified.  Noting the dominance of short term financing, the Reserve Bank suggests loans and advances from the banking sector largely financed recurrent expenditures and private consumption.

Zimbabwe had a vibrant and growing microfinance sector and SACCOs, whose services significantly dwindled, and for many ceased from 2004. Again this was because of the difficult economic conditions. Some operating in lower-income markets had their loan books completely wiped out. According to the Zimbabwe Association of Microfinance Institutions (ZAMFI), the decline began in 2007 by the end of which there were still 309 institutions licensed as microfinance service providers, which by 2011, decreased to 114. The microfinance business has, however, regained profitability, and demand for microfinance is now high, including according to one investigation, housing microfinance loans of between US$2 000 and US$ 10,000.  Owing to the regained profitability, CBZ Bank is diversifying its product range to include low-income housing finance for incremental housing as it resumes lending operations.  Some initiatives are underway with international NGO support.  Rooftops Canada is working with the Swedish Cooperative Centre and SIDA to support the Zimbabwe National Association of Housing Cooperatives (Zinahco) with technical and financial support so that it might increase its housing micro lending, and housing support services.

The government was traditionally involved in creating greater access to housing finance, including through the National Housing Fund. The fund is channelled to local authorities by the Ministry of National Housing and Social Amenities. The authorities then use it to both build top structures as well as site infrastructure. This changed with local authorities providing only serviced sites and onwards selling them. This had affordability ramifications as the plots were sold on a cost recovery basis and were not affordable to the majority. Today, municipalities have seen their capacity to provide housing and plots with basic services significantly eroded and many are unable to provide land with installed basic services or access roads. The second financing institution used by the government is the National Housing Guarantee Fund, which provided guarantees for housing loans for civil servants. The considerable Zimbabwean Diaspora also plays an important part in funding housing locally. Products have been introduced to take advantage of this, for example the Reserve Bank of Zimbabwe’s Homelink product.  The country needs to build a credit information database. It has a zero depth of credit information index at present, with no functional public or private credit registries.

Affordability

Zimbabwe’s economic situation over the past decade has affected affordability significantly. The cost of money has also been prohibitive for a long time. There has been a shortage of any form of long-term financing since 2008, and retail lending is only just resuming, a substantial part of which still remains for short terms.

The lending rate for housing purposes varies across all market players; for example, the lending rate used by building societies is averaged at about 15 percent, while for unsecured lending 35 percent. In the current market, the cheapest newly built house is about US$12 500 for a 30m² structure.  Although affordable by regional comparisons, this is still out of range of most Zimbabweans, where 69 percent lived below the Food Poverty Line and 80 percent below the Total Consumption Poverty Line in 2002.

Housing supply

In November 2011, the Ministry of National Housing and Social Amenities conceded that there was no credible data on the national housing backlog.  Studies undertaken in earlier years suggest that the backlog could be a large as two million units.  A 2007 study suggested that the backlog in major urban centres could be 660 000 units. The civil servants housing waiting list is 27 000. The Ministry strategy for addressing this backlog includes promoting housing cooperatives and other community based organisations.  A new national policy also promotes the participation of employers in providing worker housing.

Self-build is the most common method of construction, as formal housing provision, mainly dominated by the public sector, has been unable to supply sufficient units. State production generally fell short of the annual target of 162 000 units between 1985 and 2000. Self-build suffered a major setback, however, with the large-scale evictions of Operation Murambatsvina in 2005, during which 700 000 people were evicted in urban centres. Since then, there is evidence of a shift in approach, however.  In 2012, the city of Bulawayo has partnered with residents to deliver serviced stands. The residents will be asked to pay a certain amount of money towards the servicing of the stands.

Land, infrastructure and basic supply of services have become major issues in urban areas. This shortage of serviced land continues to hinder housing development activities, including by the private sector. By 2002, only 5 500 plots were being released in eight major urban areas, compared to an estimated annual demand of 250 000. This has led to stalled projects, and increased the costs of others where the infrastructure investment was made by the developer.

Housing co-operatives are significant suppliers of housing. Originally, formed by low-income groups, they gradually gained relevance with middle- and high-income groups. About 2 000 co-operatives with over 200 000 members are registered, although in reality only around 500 are functional. The co-operatives were initially supported by the umbrella organisation, the Housing People of Zimbabwe, which provided technical assistance for institutional development and housing construction. Today, a more active umbrella organisation is the Zimbabwe National Association of Housing Cooperatives (Zinhaco) with more than 1 000 co-operatives. Among the things Zinhaco has been working to change is building standards which dictate that hookups to public services must be in place before an owner begins to build a home.  With support fro Homeless International, a British NGO, Zinhaco is seeking to build more than 450 houses in six districts for low income earners by March 2013.  Another player is the Zimbabwe Homeless Peoples Federation (ZHPF), which is a member of Shack Dwellers International (SDI). SDI is an international network of grassroots organisations created to assist the poor, whose basis is savings groups formed by individuals from low-income households. ZHPF with branches in Mutare, Harare, Gwanda, Victoria Falls and Karoi has been operating for more than 10 years and has about 30 000 families as members mobilised into 330 savings groups. ZHPF is supported by the Harare-based NGO Dialogue on Shelter. ZHPF and its supporting NGOs are involved in obtaining land for housing as well as secure tenure. While providing useful and needed help for low-income communities, none of these organisations have developed sustainable financial mechanisms to provide credit for members.

Property markets

The prevailing liquidity crisis has seen property prices stagnating despite rising demand. This is especially so at the higher end of the market. The sector will take time to recover, as the availability of money in the economy remains low as financial firms continue recapitalising operations. The significant levels of poverty will also keep the market subdued for some time. Zimbabwe has relatively good housing stock compared to other African countries. Almost 70 percent of this housing stock is made of durable materials, ranging from higher-end flats and townhouses to the detached and semidetached housing found in lower-income communities. According the Central Statistics Office, shacks comprised only three percent of housing, although this has grown significantly because of rising poverty in the country. Nevertheless existing stock has decayed considerably. Compared to its neighbouring countries, the property registration system in the country is efficient; on average it takes 31 days to register a property in the country, while the registration process costs approximately 8.5 percent of the property’s value.

The pressure in the housing sector is being felt in the rental market.  Rentals have gone up in Harare and other cities by as much as 30 percent in the past year.  In some cities, tenants pay between US$85 and US$120 per month for a room.  Land prices are also under pressure.  Estimates show that 1200m² of land in Harare costs US$1000, versus an estimated US$700 – $800 in South Africa.

The property registration system in Zimbabwe is relatively efficient for the region.  According to the World Bank’s Doing Business Indicators for registering property takes 31 days to register property and costs about 8 percent of the property value.

Policy and regulation

Greater policy and regulatory certainty is required, firstly around rights over holding of property both land as well as other forms. Secondly, the general regulatory hostility towards self-build impedes incremental housing methods for the poor. The Town and Country Planning Act 1976, for example, was the legal basis for the enforcement of notices authorising organs of state to demolish structures and evict people during Operation Murambatsvina. Onerous urban housing standards have also been cited as a hindrance to housing affordability. The National Housing Convention in October 2009, which the government participated in, recognised this and highlighted that relevant laws need to be enacted to resolve this issue.

Urgent measures to support the resumption of lending in the finance industry are needed; particularly lending that can reach the lower end market, such as microfinance. It’s crucial that the government focuses on creating an enabling environment for housing finance including prudent macroeconomic management.

Opportunities

There is definitely a renewed sense of optimism in Zimbabwe after a protracted difficult period during which formal housing finance activities came to a virtual standstill. The microfinance industry was also severely affected, and there are currently calls for donor-driven recovery packages as well as deliberate government incentives to revitalise the industry. Zimbabwe had a history of a relatively substantial amount of mortgage lending to higher-income earners meaning the basic infrastructure is in place. This should work to its advantage, although liquidity constraints need attention. Already, a number of players in the industry have resumed limited lending. The mortgage market will not meet the breadth of demand however, and in this there is an important opportunity for housing microfinance. The high levels of poverty, the established base of microfinance lending that historically took place in the country, and rising demand creates the right conditions for this. A number of microfinance providers have already recognised this. Political buy-in for incremental building methods seems to be making some progress, and this needs to be backed up by regulatory reforms.

Source: Housing Finance Yearbook 2012

Sources

1. Asli Demirguc-Kunt and Leora Klapper, 2012, “Measuring Financial Inclusion: The Global Findex”, World Bank Policy Research WP 6025.
2. Economist Intelligence Unit. 2 August 2010. Zimbabwe Country Outlook
3. Housing People of Zimbabwe (2009). Report on National housing Convention, Victoria Falls, 26-30 October 2009
4. Mpofu, J (2011). Access to housing finance in Africa: Exploring the issue (No. 14) in Zimbabwe. Paper commissioned  by the FinMark Trust with support from the African Union for Housing Finance (AUHF)
5. Mutandwa, E, Sigauke, N, & Muganiwa, C, (2008). Urban women’s participation in the construction industry; and analysis from the experiences of Zimbabwe. Journal of International Women’s Studies, Vol 9, No. 3, pp. 256-268
6. Reserve Bank of Zimbabwe, 2012 Mid-Term Monetary Policy Statement.  http://www.rbz.co.zw/pdfs/2012percent20MPS/Midpercent20Termpercent20MPSpercent20Julypercent202012.pdf
7. UN Habitat (2005). Report of the fact finding  mission to Zimbabwe to assess the scope and impact of Operation Murambatsvina by the UN Special Envoy on human settlements issues in Zimbabwe. Nairobi: UN Habitat
8. UN Habitat (2009). Housing Finance Mechanisms in Zimbabwe
9. World Bank (2011). Doing Business Survey: Zimbabwe

Websites

www.africaneconomicoutlook.org

www.allafrica.com

www.barclays.com

www.mfw4a.org

www.mixmarket.org

www.rbz.co.zw

www.unhabitat.org

www.worldbank.org

www.zimtelegraph.com