Property investments come under spotlight
Debate has ensued on social media platforms on the viability of investing in property development, but real estate professionals contend that it remains a viable long-term venture with the right mix.
The property development and management experts said in interviews that type and location og the property also come into play as that could mitigate the risks.
Their sentiments follow a debate on social media platforms where some local investors described the return from the sector as low compared to gains that one could get from investing in other businesses.
Business mogul Jimmy Koreia Mpatsa said for instance, a K500 million commercial property will cost K12 million to K24 million to rent per year while the same K500 million invested in a business at a 30 percent annual return will yield K150 million.
“Even if you factor in capital gain for the property, you will be nowhere near the return on your investment….only invest in property if you have idle cash or for other reasons,” he wrote in response to a post.
The debate comes at a time figures show that the sector’s recovery from Covid-19 remains subdued with the two property listed giants, Icon Properties plc and Mpico plc, showing sluggish growth of rental incomes.
In an interview on Tuesday, real estate expert and Knight Frank managing director Desmond Namangale observed that although the sector is still in infancy and exposed to economic shocks, it remains the most viable long-term investment.
He acknowledged that property development is capital intensive and a high-risk investment vehicle with a long payback period of up to more than 15 years, as such, not many investors who are looking for short-term profits would venture into that.
Said Namangale: “Every investor would do cost-benefit analysis to understand the risks they are taking themselves into before making an investment decision.
“On the same, real estate market research would inform decision making on whathich real estate space the market demands, that’s where the questions of; for who, what and where comes in.
“Every investor asks themselves these questions and with the capital finance they have, much as it is huge, but they wouldn’t invest in real estate because it is a long-term investment and if they want fast profits, that are why some would invest in stocks/shares.”
He said that for higher risk taking investors, real estate remain the long-term investment vehicle.
Earlier, property management firm Icon Properties plc said stifled business confidence continues to hit the retail property sector as tenants struggle to stay afloat and fulfil rental obligations.
Icon Properties plc board director Graham Chipande is on record as having said that the property market outlook is mixed with the economy going through a number of pressures.
Similarly, Mpico plc’s rental income grew 31.8 percent in 2017 to K5.5 billion and subsequent rises followed in 2018 and 2019 by six percent and 11.5 percent, respectively
