Monday, July 26, 2021

BHC rental hike: Can it turn the renting vs. owning cycle?

In 2012 the Botswana Government through the Ministry Of Lands And Housing announced the establishment of Single Housing Authority (SIHA), which will be responsible for all housing implementation programmes through the Botswana Housing Corporation (BHC) as a single housing delivery vehicle.

Fast forward to 2020, which is eight years since the announcement, the question that remains unanswered for aspiring home owners, especially young Batswana who just joined the labour market is whether the existence of BHC as SIHA will ever result in improved home ownership at affordable prices or it can only get tougher?  

Reginald Motswaiso – Chief Executive at BHC says the issue of ‘affordability’ is subject to the targeted individuals. He says as long as certain individuals are not ‘targets’ to purchase when certain housing properties are developed then affordability will always be out of reach for such individuals.  

The question on rising housing rentals vs. ownership comes at a time when figures shows that only a sizeable number of Batswana has houses they can legally call theirs. Figures contained on the 2009/10 Botswana core welfare indicators survey (BCWIS) carried by Statistics Botswana shows that only 3.3 percent of households in Botswana lived in a house that they had bought whereas over 50 percent lived in their own self-built accommodation while 42.5 lived in rental or institutional accommodation.  The survey also shows a small number of residential mortgages – approximately 20 000 in 2016.

Fast forward to 2019, figures showed that there is little improvement in the property market but off-take of high end residential remained distressed.

Without categorisation by nationality, a report compiled by independent property valuers – Ribbery Property showed that buyers and renters opted for cheaper housing.

The quarterly report indicated that the residential market for the lower-end and medium-cost properties continued to have good demand and supply compared to the weakened higher-end residential buildings. During the first quarter of 2019 the average price for houses sold shot up to P852, 529, an increase of 11.1 percent from 2018 year’s closing quarter.

The Ribbery Property report disclosed, at the time, that the residential rental market in Botswana weakened as evidenced by the fall in rental prices for higher-end properties as well as weak demand for middle-end houses. The lower-end properties were preferred for rent as shown by good demand for the units.

Given this trend over the years, BHC maintains that its housing units remain the cheapest in town.  While shifts in the economy and personal finances will forever be of great influence on whether Batswana buy homes in their 20s, 30s or 40s, and what kind of property they purchase, the state owned company believes that their rental rates have also had a great influence on whether prospective house buyers decide to buy or rent for life.

Motswaiso says the state owned housing corporation’s current rentals discourage tenants to buy as some rentals are as low as P518,00 but market rentals for comparable properties at around P2, 500,00.

“Tenants prefer to rent BHC houses perpetually instead of buying them”, Motswaiso said at a press conference called by the corporation to announce the hiking of rental fees that BHC is the first in 16 years.

Motswaiso strongly posits that the low BHC rentals are making citizen home ownership empowerment initiatives, especially those targeted at sitting tenants, unsuccessful.

“Mortgage repayments in the market are almost five times higher than the monthly rental”, Motswaiso said.

To correct what BHC sees as abnormality, Motswaiso says the corporation will from April 2021 hike its rental fees. The plan is to hike the rentals for individual customers annually on compound basis until they catch up with the market by the fifth year. At the same time, still from April 2021 will straight-away adjust rentals for Government, Government Departments, Local Authorities, Parastatals, Private Companies and other corporate bodies to market rentals and be kept at market through annual reviews.

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