Forces behind Dar`s real estate prices

DarProperty Tz · 2013-08-04T19:10:58+00:00

While we all know the factors affecting the prices in a free enterprise economy are simply the demand and supply, or the market forces as preferred by those who have been to an economics lecturer room. The real estate market is a bit unique, yes the demand and supply do influence the price but a third force also exist, the force is the public policy. The public policy simply is regulations on land use by the government bodies to preserve the endangered species or sometimes style of living preferred by the existing residents. The regulation is on use not price. Many great minds have written about the real estate prices in Dar, and some went further to term it as an artificial. I understand their frustrations but I wonder if that was the best selection for their conclusion. With over eight years observation in our real estate market where I have served in different capacities, as an agent, tenant, property manager and now an awaiting landlord, Here are some of the forces that are behind our real estate price in Dar. Our geography. Dar es salaam being the commercial epicenter of the major economic activities in our country, it is quite obvious there will be continuous growth of demand from the commercial business district (CBD) towards the peripherals. The position of our CBD is just so next to the Indian Ocean, hence inhibiting the radial growth of our town to the East, since we cannot go the Netherland ways and reclaim our ocean front. Scramble for the West lands definitely has hike the prices in the areas of Msasani Peninsula, Upanga and all the close locations. The completion of the NSSF Kigamboni bridge will with no doubt help to ease the demand pressure on the west sides of the city and followed by the easiness on price tags of the property near the CBD and it peripherals. Poor infrastructure Traffic jam and unreliable water supply top the chat of concerns for many property seekers; however, property seekers for residential or commercial premises are willing to pay a premium to save hours daily to and from the CBD. This would not be an issue if we had a proper road network. For example: If we had a superhighway running from Tegeta to the CBD and you could only spend thirty minutes on the roads, why would you pay more to live around the CBD?. It is only a handful list of locations that do have proper road networks and water supply making them so precious like an oasis in a desert. Before we start to complain and take all the blames to the government, let us take a moment and see how we can solve it at the personal level. Do we all pay are taxes? Do we close our taps and pay Dawasco all that is due? Greater fools. I know you are wandering if you have just read it properly. Yes! It is FOOL. There is a famous theory on investment called the greater fool theory, under this theory; investors justify purchases at a high price because subsequent re-sales can be made to an even greater fool at an even greater price. Ultimately, when no greater fool can be found, prices stop rising and begin to fall. (Wurtzebach, 2001). This was evidenced in our economy, around 2005/6 property were sold day in day out at shocking prices, however, the trend has changed. Is there no greater fool in the market anymore? Absence of listing agreements. Listing agreement is the contractual agreement between Landlord (principal) and the agent whereas the latter is authorizing the agent to perform services for the principal for a consideration, usually a commission (percentage) on the sale price. In Tanzania most of the property on sale have not been listed to any real estate agent, the landlord would take the tenant from the agent but since there isnt being any contractual agreement for a certain fee. The landlord might not remunerate the agent, for this reason the agent have opted to add a margin on the property price to act as their fee, Example if the property is going for Tsh 100,000,000 the agent might offer it for Tsh. 120,000,000 so as to pocket the difference. Most professional real estate agents demand a fixed commission fee rather than this mode however they are also crying for exclusive listing agreement which only a small group of the agents do enjoy for now. Other writers have condemned the real estate agents for inflating the price but I think they should be empathetic to understand the treatments from the landlords or sellers. If the agents were assured their fees or working on better terms they would have done a better job. The writer went further to say that, The government cannot let madalali brokers with little knowledge of the housing market to dictate prices at the expense of their lust. It cant let control of the land and housing into the hands of a few who in turn dictate the pricing on where we live and sleep. Meaning if you cant steal or engage in corruption, decent housing becomes a dream. In real scenario most real estate agents wish for prices to go down, to make the market more vibrant, for them to close more and more deals. Panic purchase Generally the panic purchase refers to the purchase of a stock immediately after a sudden, substantial price increase but here for lack of a better word am trying to look up on the individuals who get their moneys through unjustifiable ways. i.e drug lords, Mafisadis and many other bandits. This group because of the ways they have obtained their moneys, buying real properties is their best alternative to store their wealth and hide from the eyes` of the watchdogs such as TRA, PCCB and Ethic commission. With desperation to convert their liquidity to other assets the group buys at inflated prices and hence set prices way beyond the rational real property consumers. Bottom line The real estate prices in Dar es salaam is a complex matter and cannot be discussed by one individual or covered in a single article. These are personal observations and I am firmly confident each and every individual can have his or her own personal experience on issues regarding this sophisticated industry. Although at its infancy, the industry shows a promising future and great opportunities for development across many sectors in our country. by: babumikael@gmail.com To Learn more about Tanzania`s Real estate Market, Listings and trends, simply visit Dar Property Home

Thread starter DarProperty Tz
Start date Aug 4, 2013

DarProperty Tz

Senior Member

Aug 4, 2013

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Forces behind Dar`s real estate prices

DarProperty Tz

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