The continued growth and investment into the property sector on all fronts (residential, commercial industrial and retail) is a clear indication that confidence is high. The construction of York Commercial Park along Kafue Road (Zambia’s first logistics park developed by ACTIS); Cosmopolitan Mall, and the increase in residential housing construction further cements the general opinion that Zambia is one of Africa’s next property frontiers.

RETAIL

The retail sector has grown over the last few years, particularly in Lusaka and this growth shows no signs of abating. The Kwacha Pension Trust Fund is working on their first retail project along Lake Road in Kabulonga, Lusaka, where the anchor tenant will be Choppies, a grocery retailer from Botswana. Choppies will occupy a retail space of 2,300 square metres (sqm) alongside two smaller retailers.

Zambia tends to react with interest to the arrival of new retail brands from outside the country,even though the initial piquing of interest is often followed by slow adoption rates. The arrival of Choppies supermarket chain, the largest private sector employer in Botswana, with outlets in South Africa and Zimbabwe, will continue to add to the variety Zambian’s consumers. The rollout programme for Choppies, the expansion programme for Shoprite and the aggressive steps taken by Pick‘n’Pay in the market, is evident that Zambia’s has the ability to absorb more retail.

Other developments of note include the recently opened Mukuba Mall, a 30,000 sqm development and Nkana Mall, a 12,000 sqm development, both in Kitwe; a 5,000 sqm retail development in Chingola and planned developments of approximately 20,000 square meters over the next 12 months. There are also planned developments in Chililabombwe, the border town with the Democratic Republic of Congo (DRC), and developers have started to think about developing outside of major urban centres. Developments are also planned for Nakonde, bordering Tanzania and Chirundu, bordering Zimbabwe. Even though these are not major urban centres, there is the potential to benefit from crossborder trade, in addition to regular footfall from those working in the service and government sectors.

In many locations, the consumer now has a choice of shopping on their doorstep, causing a shift in patterns to weekly shopping as opposed to monthly visits to a larger shopping centre, and as a consequence the variety of product and service offerings in shopping malls in Zambia is becoming increasingly important.

COMMERCIAL

There vacancy rate remains high within Lusaka as businesses are struggling to afford current rental rates that new buildings are priced at. The demand is estimated at around 10,000 square metres, however businesses are largely unable to afford the $18-20 USD per sqm in rent. As a result there has been a rapid increase in the  number of residential properties being occupied by businesses whose rental is approximately around $9-10 USD per square metre. Whilst renting in an office park offers businesses a level of prestige, rents are double the residential rate and businesses have to consider whether switching from a residential setup to a commercial office park  is going to increase turnover to levels that justify a higher rental. Therefore, the market for residential properties for office space will remain strong for some time. For new commercial developments, the core consideration has to be whether occupancy will be achieved a rate that is expected by both the developers and the financiers – particularly as the land for workable locations comes at a premium.

RESIDENTIAL

The Zambian residential property market continues to offer great investment opportunities for the diaspora; however a great number have challenges in investing in this sector; which has typically been centred around self-build projects in locations that do not necessarily have strong rental market. Zambians in the diaspora have predominantly invested in residential property as a retirement investment, thereby taking a medium-to-long term view. The residential market now offers some varied investments (e.g. residential housing developments) that would be able to reduce the risk and to a larger extent the challenges faced by the diaspora in purchasing property back home.

Lusaka’s property yields are typically between 6-9% per annum, and capital appreciation on assets sits between 7 -10%  per annum. There has been some exceptional property value appreciation, in emerging residential areas such as Northgate Gardens which saw close to 100% value appreciation. Initial sales were at K350, 000 at launch date in 2012, and current sales (Q1 2015) at K600,000. The Ibex Hill and Twin Palm areas continue to show value appreciation for land as demand increases for residential developments, due to the improved infrastructure and social amenities.

The debate continues as property purchasers believe that a self- build is less costly than purchasing in a development. The rental potential of a development is higher as the buyer gains the environment, community, road infrastructure, electricity and water, and is close to amenities. However, a potential owner should weigh the costs of a long and protracted self-build (without guarantees) versus purchasing a ready to move in home with the benefit of an immediate income. The benefit of a development purchase (whether one is looking to take occupancy themselves or let it out) include the following: The overall running costs of a house in a development are 40% cheaper than standalone houses. They come with a construction guarantee. And offer an immediate return on investment.

RENT-TO-BUY

The largest challenge that the Zambian property market currently faces is the affordability (or lack thereof) for mortgages due to the interest rates that are at approximately 17-21%. Having taken this into account, Pam Golding properties with its development partners at Leopards Rest has embarked on a rent-to buy scheme.

One of the issues around mortgage affordability is raising the initial deposit which ranges from 10% upwards of the purchase price of the property. At Leopard’s Rest one can purchase a unit as they enter into a rent-to- buy scheme with the developer. The monthly rental paid goes towards building their deposit over two years. As many people cannot afford to pay both rent and, this scheme enables a buyer to use their rental payments towards building their deposit for a mortgage

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