There are fears that the local housing market is struggling as the sector continues to weaken, characterised by falling demand for high end residentials and soft rental prices.
Fears that the real estate sector cogs are grinding slowly after years of strong growth have been picking pace in the last five years, with banks recording high numbers of foreclosures, also compounded by lukewarm desire to purchase expensive properties.
The 2019 third quarter property report prepared by property valuers Ribbery Botswana has revealed that the residential rental market slumped last year, with demand muted in upper and middle end properties. However, the rental at the lower end of the market continues to enjoy good demand and supply.
According to the report, the average price for residential properties sold in the third quarter of 2019 decreased by 4.8 percent to P708 180 compared to the previous quarter, reflecting the lower value of properties traded in the quarter under review. About 477 properties were sold in the third quarter of 2019 compared to 474 in the previous quarter.
The property valuers added that the demand for lower-end prime located residential housing is expected to improve given affordability of properties in this category relative to middle and upper-end properties.
The demand for high-end housing might take a while to bounce back following the amended Transfer Duty Act, which hiked the duty levy from 5 percent to 30 percent for foreigners buying property in Botswana. The move faced criticism from some quarters, arguing that it will slow down purchase of properties by foreigners, who have buying huge chunks of land and had affinity for higher-end housing.
Steven Bogatsu, the chief executive officer at First National Bank Botswana (FNBB), the country’s largest commercial bank, said in March they had nearly 400 houses repossessed as he warned of non-performing loans. In January, total outstanding loans given out by commercial banks topped P62.8 billion, with 63.7 percent or P40.3 billion held by households. Property loans stood at P9.9 billion of the total household debts, representing 24.7 percent.
According to the latest Ribbery report, the influx of buildings at Central Business District (CBD) has been blamed for the ailing office space market. Companies and organisations have ditched old offices in Fairgrounds, Gaborone International Finance Park, as well as Commerce Park, as they move into plushy offices in the CBD area. While there is generally weak demand for office space, there has been reasonable uptake of office space in CBD, thanks in part to the government which has taken residence in some of the sprawling office blocks.
Meanwhile, the demand for retail space remains fair across all market segments, with proposed major shopping centres in the CBD and Mogoditshane. In addition, other centres with good demand for retail space are Maun, Francistown, Mahalapye and Palapye.
With regard to industrial property, the supply of bigger warehouse space has decreased, while the demand has improved. The supply for prime location industrial space is expected to decrease, going forward, given that most of the centrally located industrial land is almost fully developed and occupied.