Tuesday, October 19, 2021

The scramble for home ownership

In 1982 Botswana drafted her first housing policy with an intention to encourage the building of new urban housing for all income levels to avoid illegal settlement and to improve housing in rural areas.

Other goals outlined in the 1982 policy included gradual reduction of housing subsidies and redirecting them to middle and lower income housing to the rural areas, withdrawal of Government from construction of higher cost housing by strengthening the private sector to undertake this responsibility as well as encouragement to commercial bank and the Botswana Building Society (BBS) to lend money to lower income and rural households.

However, thirty six (36) years down the line, a sizeable number of the country’s dwellers remain desperate to make their first purchase of a residential property. The main challenge remains lack of finance.

While several years ago it was not “too hard” for prospective and aspiring first time home owners in Botswana to get their mortgage application approved by the bank, tables have since turned.

“The bank experienced stress in its retail portfolio, predominantly in the residential property and unsecured term loans portfolios due to harsh economic conditions”, says Steve Bogatsu.

Bogatsu is the Chief Executive Officer of the First National Bank Botswana (FNBB) ÔÇô a market leader in the banking space in the country. He was speaking at the bank’s presentation of its interim results recently.

While Bogatsu only shared his bank’s story, latest household credit figures from the central bank paint a picture of a residential property market that is getting frustrated by day.

In its 2018 Monetary Policy Statement (MPS), Bank of Botswana shows that the lower rate of increase in lending to households in 2017 was mostly due to the slowdown in the yearly rate of expansion in mortgage lending.

The official figures shows that mortgage lending by locals banks to aspiring home owners decreased from 6.3 percent in December 2016 to 4.8 percent in December 2017.

“The lower growth of mortgage lending is consistent with weak residential property market, especially at the upper-end”, says Dr Tshokologo Kganetsano, Director in the Research and Financial Stability Department at Bank of Botswana. Dr Kganetsano was addressing financial journalists after the launch of the 2018 MPS statement by the BoB Governor Moses Pelaelo in the capital Gaborone in late February 2018.

He adds that, “lending to the sector is becoming more stringent as a result of concerns about the borrower’s ability to repay”.

In 2013 First National Bank of Botswana organised a roundtable to discuss ‘Affordable Housing’ in Botswana, an alternative to first time home owners who are usually classified as

The roundtable was organised after signs that prospective buyers are fatigued due to a sustained increase in property prices over the last few years.

“Government, commercial banks, private developers and pension funds need to start talking because affordable housing can only be affordable in the real sense if all players participate. We must have within our mist active supporters of affordable housing (advocacy group) whose aim will be to steer policy,” Real Estate Institute of Botswana President Modiredi Maruping told the participants at the FNBB roundtable.

Whilst signs are that FNBB and other mortgage lenders opened up their doors for aspiring home owners some five years back, not all of them are now able to repay the money. The local press is now awash with advertisements of auction-sale done on behalf of banks for repossessed houses.

“Our bank has a sizeable number of houses that we repossessed from load defaulters. We continue to sell them back in the market through auction sale”, said an employee in the banking sector.

Meanwhile the Bank of Botswana says the share of mortgages in total bank credit to households decreased from 28.4 percent in December 2016 to 27.8 percent in December 2017.

The central bank expect the property market to remain weaker which means only a few prospective home owners are likely to get finance to purchase houses.

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