Thursday, September 29, 2022

Property in Gaborone costs an arm and leg

Property prices in Botswana’s capital city, Gaborone, are six times more expensive than its surrounding peri-urban areas such as Mogoditshane and Gabane, according to the newly compiled 2017 property report by Vantage Properties, a local investment consultancy firm. 
Vantage Properties released the report last week Wednesday in which the firm’s Chief Investment Officer, Lloyd Sungiririrai, announced that properties in Gaborone are on a separate price league. 

The report sells for P2 000 given that it contains information that will give investors an advantage in the market in terms of guiding decision making related to property investments. 

Sungiririrai also mentioned that due to the forecasted lower property growth compared to past growth,  investors who enter the market today will either have to hold on to their property a little bit longer before selling or sell now so as to fetch a better price. 

Regarding financing of property Sungiririrai highlighted that bank credit figures indicate their capability of lending which means that if investors sufficiently meet the demands of banks; financing is possible. 

Another report titled Africa Property Report compiled by South Africa-based company called Excellerate Property Service released in 2016 cites that “Botswana’s property market, dominated by Gaborone, has seen robust growth in recent years on the back of strong economic performance and increased FDI”. 

Perhaps the economic activity in Gaborone explains the higher property prices. A recently released World Bank report titled African cities: Opening doors to the world, highlights an important aspect to property pricing, citing that the pricing of land on the market depends partly on policies, which it recommends must be designed with great care.   

The local property market has been described by pundits that it demonstrates a series of impediments relating to the land system which as a result makes it difficult for investors to pursue developments. 

The World Bank report provides a broader regional perspective on property which among other observations identifies shortcomings. In terms of land rights and administration issues, it notes that African countries are making improvements. 

“Botswana took the bold step of regularising customary lands in 2008, partly because the land boards faced challenges to administering tribal land,” it states. A more recent change related to property which Finance Minister Kenneth Matambo in his presentation of the 2017/18 budget speech indicated is currently being considered is that of extending property rates to rural areas in an attempt to generate revenue for Local Authorities. 

The World Bank report broadly acknowledges that higher revenues from land and real estate can come from improved compliance, so that more property owners pay land and property taxes, which broadens the tax base. 

It warns however that “setting in place land and real estate tax systems that support economic density is not straightforward. Strong institutions are essential to define property rights clearly; ensure standardised and objective methods of land valuation; and support and oversee the process of land management, land sales, and tax collection.” 

The project is expected to start in the 2017/2018 financial year. It remains to be seen if the institutions involved have the capability and capacity to achieve the intended goal. 

Perhaps what could also be considered regarding this new initiative is the fact that rural area dwellers do not have access to employment opportunities, which as Matambo acknowledged, results in migration to urban areas. 
The Vantage Property report identified in that regard that the lack of jobs affected property purchases. This brings into question the viability of the initiative given the lack of employment in rural areas. 

Sungiririrai estimated the rural to urban migration at 57.4 percent, which he said provides a gauging to determining the demand for property in urban areas.


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