Zimbabwe: 'Greedy' Sellers Distort Property Market

PRICES of residential properties in Zimbabwe are distorted because potential sellers use comparative methods and are being greedy instead of carrying out proper property evaluations, analysts said this week.
Property analysts said most residential properties and stands on the market are not priced correctly because sellers compare their properties with similar ones in classified sections of newspapers or on the internet, which in most cases were not correctly priced.

Real Properties director Prosper Madzime told businessdigest that greed and failure to embark on proper valuations was resulting in most properties in Zimbabwe being overpriced.
"What most people do not know is that many sellers settle for a lower price compared to what they would have advertised in papers," Madzime said.
A comparative method is when one has a five-bedroomed house in Mount Pleasant which they want to sell while a similar property in the same area is being advertised in the media for about US$100 000, then sell their house using the same figure. This is despite the two properties being built differently, in different conditions, having different features such as swimming pool, tennis or basketball courts and proximity to recreational facilities.
"If you research, you will find that only those properties where proper valuations were done and are priced right were not staying long on the market," he said.
 Valuation is the act of determining the value of a property. It is the price of the property established by appraisal of its quality, condition and desirability or the cost of replacement and near recreational facilities.
"We may also say that it is the art of being able to put opinions into mathematical or monetary form," Madzime said.
In terms of Statutory Instrument 156 of 2006, valuation means a formal report prepared by a valuer in accordance with his client's instructions stating the valuer's opinion on either the open market value of any property in terms of its capital or rental value. This will be as at a certain date or/and the replacement cost or depreciated replacement cost of any building and improvements thereon as at certain date, whether or not such valuation was arrived at with the assistance of a building construction professional.
 "Valuations calculate a building's worth and are vital for a business decision. They are done for various purposes including, capital gains tax and other taxes Zimra may require such as mortgage security," Madzime said.
Ailse Properties Managing Director, Andrew Chifamba told businessdigest proper valuations were necessary, adding sellers who use comparative methods were "speculators who inflated eventual prices".
"A number of aspects are taken into consideration before a residential property is sold for the correct price," he said.
Chifamba said there were a number of properties that have been on the market for more than five months because they were not priced correctly.
"The classified section and the internet are just guides. Sellers should talk to a number of estate agents and find out the prices of residential properties whose sales were concluded if they are to peg the correct price," Chifamba said.
 Chifamba said a valuation will enable a client to be fully informed before making any decision and could save thousands of dollars.
According to the Valuer's Act of 1996, a valuer is the person who is registered in terms of the Act, or a company or partnership practising or carrying on business as a valuer in terms of the Act. A valuer's art is more than making estimates and desktop assessments or price appraisal.
It requires skills in carrying out researches, feasibility studies for developments, project management, financial consulting and even discount cash flow analysis.
It also involves working with comparable data, searching for relevant information, for example deeds searches, town planning, studying the lease, producing a detailed valuation report which must include information such as full instruction by the client, purpose of the valuation, basis of valuation such as open market value, correct description of the property, the extent of the subject property and date the inspection was made and the effective date of the valuation.
"The most difficult sellers are those who bought or built their houses at inflated prices in or before 2008. With the economy stabilising, they will sell their properties for much less than they bought or built them," said Chifamba.
He said many properties currently on the market were overpriced to sell in our current environment.
Many owners appear to feel that getting rentals is a viable option to retain the value of their investment. This is despite most properties dropping in value from the time they are first leased.