In its latest monthly report, the bank said there are indications most people are investing in physical properties such as stands and shops in cities instead of financial assets which are under pressure
The African Development Bank says many investors in Zimbabwe are exiting the troubled financial markets to the perceived safety of the property market.
The bank said there are indications that most people are investing in physical properties such as vendor stands and shops in cities instead of financial assets.
It said investors are also being pushed into the property market due to cash withdrawal limits introduced a month ago by the central bank to address poor liquidity.
The AfDB said such moves have been counter-productive. Total banking deposits increased from US$2.3 billion in 2010 to US$3.3 billion in 2011.
“Cash limits can easily result in weakening bank depositor confidence, deposit flight from weak to strong banks, externalization of cash and investments in illiquid assets,” it said.
In its recent monetary policy statement, the Reserve Bank of Zimbabwe set US$10,000 as the instant maximum cash withdrawal limit. Amounts exceeding that figure would require prior notice to the bank in question.
The withdrawal limit is expected to lapse on Tuesday “as the central bank has realized that it [has] adversely impacted on confidence of the banking system," the bank said.
John Mushayavanhu, president of the Bankers Association of Zimbabwe, said the development bank’s assessment is fundamentally flawed as banks continue to record significant deposits while the property market remains subdued.
Masimba Kuchera of the Zimbabwe Coalition on Debt and Development said investors are in fact fleeing stocks to move into real estate.