The real returns on property

Leonita Mhishi

FOR decades, Zimbabweans have repeated one investment mantra almost as if it were sacred scripture: “Buy land. Buy a house. Property never loses value.” It is advice passed from parents to children, from relatives in the diaspora to families back home, and from businesspeople to young pro­fessionals hoping to build wealth.

But in an economy that has experienced repeat­ed currency changes, inflation shocks and fluctuat­ing consumer spending, perhaps it is time investors asked a more important question. Not whether prop­erty is a good investment, but what returns it actually delivers.

The difference is significant.

An investment should not simply preserve wealth. It should generate measurable returns. Every serious investor, whether buying shares on the Zim­babwe Stock Exchange, investing in Treasury Bills or purchasing a residential property, should eventu­ally ask one question: What am I really earning?

Too often, Zimbabwe’s property conversations are driven by emotion instead of numbers.

The sight of cranes transforming Harare’s sky­line, new gated communities emerging in Borrow­dale, Ruwa, Arlington and Mount Hampden, and rising property prices create an impression that for­tunes are being made effortlessly. Yet behind every attractive property listing lies a far more complicated financial reality.

The first source of return is rental income. Across Harare, gross residential rental yields generally range between six and 10 percent annually depend­ing on suburb, property type and occupancy, while some market surveys suggest certain lower-priced residential properties can produce even higher gross yields before expenses.

The keyword, however, is “gross.” Gross yield is calculated before maintenance, municipal rates, in­surance, security, repairs, vacancies, agent commis­sions and unexpected costs. Once these expenses are deducted, the actual return shrinks considerably.

Take a property purchased for US$120 000 that earns US$800 monthly in rent. Annual rental in­come totals US$9 600, representing a gross yield of eight percent. Now subtract annual maintenance, repainting, plumbing repairs, municipal charges, oc­casional vacancy periods and other ownership costs. The investor may ultimately retain only six percent or less. Suddenly, the numbers look very different.

That does not make property a poor investment. It simply means investors must distinguish between gross returns and net returns.

Zimbabwe’s market also has another unique characteristic. Unlike developed economies where investors frequently depend on mortgage finance, many local property purchases are completed using cash, diaspora remittances or privately arranged fi­nancing. This changes investment calculations en­tirely.

Without monthly mortgage repayments, rental income becomes a genuine source of cash flow rath­er than merely servicing debt.

Diaspora demand has become one of the most powerful drivers of Zimbabwe’s residential market. Market analyses indicate overseas Zimbabweans account for a substantial share of demand in Harare, reflecting confidence in bricks and mortar as a store of value despite broader economic uncertainty.

For many families abroad, purchasing property serves several purposes simultaneously.

It secures accommodation for retirement. It protects savings from inflation. It generates rental income. It creates an asset that can eventually be passed to future generations.

Viewed through that lens, property becomes more than an investment. It becomes financial in­surance. Yet insurance should not be confused with exceptional profitability.

Zimbabwe’s property market often rewards patience rather than speed. Unlike listed shares, a house cannot be sold tomorrow morning because the owner needs cash. Selling property frequently takes months, sometimes much longer, especially during periods when buyers become cautious.

Liquidity matters. An investment that cannot easily be converted into cash carries its own hidden cost. This explains why experienced investors rarely allocate every dollar into property alone. Diversifi­cation remains essential.

Another source of return comes through capital appreciation. Historically, well-located residential properties in prime suburbs have generally increased in value over time, although appreciation varies considerably depending on infrastructure, demand and broader economic conditions. Recent industry estimates place annual appreciation in key locations within roughly the mid-single to low double digits during favourable market conditions.

Location remains the single biggest determinant. A modest property near expanding commercial cen­tres, quality schools and improving road networks can outperform a far more expensive house in a stag­nant area. Zimbabwe has repeatedly demonstrated this pattern.

Areas once considered peripheral have become highly desirable as urban expansion continues push­ing outward from traditional city centres.

Infrastructure investment often transforms prop­erty values long before homeowners realise it. This is why smart investors spend almost as much time studying future road developments as they do in­specting kitchens and bedrooms.

Numbers matter more than appearances.

The temptation, however, is to assume that ev­ery property automatically produces wealth. Reality says otherwise. An empty house generates no rental income. A difficult tenant can wipe out months of expected returns. Major repairs can consume years of profits.

Inflation also complicates calculations. Zim­babweans understand inflation perhaps better than almost anyone else in the world. Although recent monetary reforms have aimed to improve stability, inflation has periodically affected construction costs, maintenance expenses and household purchasing power. Housing costs themselves have contributed to inflationary pressures during some periods.

For landlords, rising repair costs may outpace rental increases. Replacing roofing sheets, electrical wiring or plumbing can become significantly more expensive within relatively short periods.

Meanwhile, tenants often resist equivalent rent increases because household incomes fail to keep pace. This squeezes real investment returns.

The lesson is straightforward. Property investing should never rely solely on optimistic assumptions. It requires careful financial modelling. Every inves­tor should calculate purchase price, transfer costs, legal fees, expected maintenance, vacancy assump­tions, insurance and taxes before signing any agree­ment. If those calculations still produce acceptable returns, then the investment deserves consideration. If they do not, walking away may be the smarter de­cision.

Perhaps the biggest misconception surrounding Zimbabwean property is that appreciation alone guarantees success. It does not.

A house that doubles in value over 10 years may still underperform another investment if rental in­come remained poor and maintenance costs esca­lated throughout ownership. Total return combines both rental income and capital appreciation. Ignor­ing either produces an incomplete picture.

Interestingly, Zimbabwe’s property market still enjoys one enormous structural advantage. Demand continues to exceed quality housing supply in many urban areas. Rapid urbanisation, household forma­tion and continuing demand for secure accommo­dation mean well-positioned residential properties are unlikely to become obsolete anytime soon.That underlying demand offers investors a degree of resil­ience unavailable in many speculative assets.

Still, resilience should never be mistaken for guaranteed profit.

Every investment carries risk. The smartest Zim­babwean property investors today are no longer ask­ing whether property is safe.

They are asking tougher questions. What is my net yield?How long will I recover my capital? What happens if the property remains vacant? Can I still make money if maintenance costs double? Those questions separate investing from gambling.

Zimbabwe has produced countless stories of families whose fortunes were built through real es­tate.

It has also produced stories of unfinished houses consuming savings for decades, empty commercial buildings waiting endlessly for tenants and investors discovering too late that expensive properties do not always generate impressive returns. The difference between those outcomes was rarely luck. It was arithmetic.

Property remains one of Zimbabwe’s strongest long-term wealth preservation tools. But preserv­ing wealth and growing wealth are not identical objectives. The future belongs to investors who un­derstand both. The next generation of Zimbabwean property buyers should therefore resist the seductive simplicity of the old advice to “just buy property.”

Instead, they should embrace a far more profit­able philosophy. Buy the numbers first. Then buy the house.

l Mhishi is the principal registered estate agent at HSP Realty and can be reached at +263 772 329 569 or via email at leonita@hsp.