There is a widely held conviction that real estate is the safest investment in the world. While the statement can loosely translate to an advantage for real estate as a favorable investment class when investors chose where to put their money, the reality of the matter is investors are no more swayed by convictions or widely held assumptions. They now require credible information or data to support every assumption, conviction or idea that may be put across. As if this is not enough, the world has witnessed a transformation in as far as risk appetite for investors is concerned. Investor are no longer after safe investments but high risk investments which at the end of the day also offers high returns.
The risk–return profile of an investment asset otherwise known as the risk–return tradeoff which is the relationship between the amount of return gained on an investment and the amount of risk undertaken in an investment has become a very important concept in capital allocation decisions. The more return sought, the more risk that must be undertaken. As long as information about real estate investments in Zimbabwe is not available and the associated risk exposure cannot be measured, then we still have a long way to go for us to attract investment both locally and from abroad.
Investors in both local and global property markets increasingly expect comparative, accurate and timely data. Offering an objective performance report is a real competitive advantage to a fund, and assists companies to improve their investment and management processes through the availability of credible data and research.
The market is therefore suffering an information gap and to make matters worse the liquidity crisis. The Liquidity crisis has had various adverse effects on the property sector, the prominent one being the absence of major commercial property investment activity. The rest of the world is now focusing on REITS, Mutual Funds etc. as a new way of financing real estate investments. Locally, investments are still being done using traditional means and this could be the main reason we find it hard to attract investment from abroad while our peers such as Botswana, Namibia and Nigeria continue to get meaningful investment ahead of us from the neighboring South Africa.
Traditional players are slowly withdrawing funds from the real estate market due to liquidity constraints. They are moving funds to more credible and short term investments with better returns. This is a wakeup call to the real estate fraternity to address in detail the issue of the changing investment landscape and come up with innovative tools to retain and attract more investment in the market.
It seems illogical to talk about the problems without proffering solutions. The solution to the challenges highlighted is quite easy but requires stakeholder’s commitment to implement. The first step would be to come up with a central information database and the adoption of international best practices so as to improve professionalism and investment decisions. In terms of achieving the above I understand REIZ is working to bring the Investment Property Databank (IPD) into the country.
IPD is a global information business, dedicated to the objective measurement of commercial real estate performance. It provides real estate performance analysis for funds, investors, managers and occupiers. It offers a full range of services including research, benchmarking, conferences, regional and global indices, performance modeling, data metrics and risk analytics.
The services are offered across direct property, listed and unlisted vehicles, joint ventures, separate accounts and debt. IPD indices are the basis for the developing commercial property derivatives market, and the most authoritative measures of real estate returns worldwide.
The Index is expected to pave a way forward for the opening of Zimbabwe’s property investment sector to new investors, and provides an important tool for local players. This also assists companies to improve their investment and management processes through the availability of credible data and research.
The information will help investors and managers to take a disciplined approach to asset and portfolio risk management, and facilitate cost reduction and increased efficiencies in property management.
In this light, we pin our hopes on the successful implementation of the project which I believe will help to position and transform the real estate market into an investment haven in Zimbabwe.
DisclaimerFrancis Chinjekure writes in his capacity as the Research Officer of The Real Estate Institute of Zimbabwe (REIZ). The views expressed in this article are his personal views and do not necessarily represent the views of his employer unless or otherwise stated.The article is for informational purposes only, for investment advice you can consult with your usual advisors. The Real Estate Institute of Zimbabwe and the writer do not accept responsibility for loss caused to any person who acts or refrains from acting in reliance on the material in this article, whether such loss is caused by negligence or otherwise. For feedback on this articleyou can get in touch with him on email@example.com