Trends and issues facing the real estate market in Botswana

The Botswana real estate market continues to show strong resilience despite the challenges of the Covid-19 Pandemic and global economic pressures due to the Russia-Ukraine War.

Botswana economic outlook
After achieving excellent growth in the last quarter of 2021 and first quarter of 2022, growth has slowed in the second quarter for various reasons including the Russian invasion of Ukraine which has affected economies around the globe. That said, according to the latest Econsult Economic Review, real GDP growth in the year to June 2022 was 6.7%. The International Monetary Fund (IMF) has, however, downgraded Botswana’s growth projections for 2022 from 4.7% to 4.3% for various reasons.

We have also seen a good recovery of the Botswana Stock Exchange with all three indices up (as measured at the end of August). The Business Expectations Survey (BES), conducted by the Bank of Botswana (BoB), shows strong confidence and business remains optimistic, but do expect cost pressures to remain due to supply constraints arising from the Russia-Ukraine War. Business is therefore expecting growth of 3.8 percent for 2022, slightly below the IMF and Ministry of Finance expectations.

Inflation and the interest rate
Due to global effects, inflation has accelerated which necessitated the BoB to tighten monetary policies and hike the interest rate as we have seen with other central banks globally and in South Africa.

Although inflation eased to 13.8% (September), it is only forecast to fall back within the 3%-6% objective range by late 2024. That said, unlike many other central banks, after the 50bps hike in August, the Central Bank of Botswana kept the rate flat in October at 2.65% to support economic recovery.

Borrowing and mortgage loan finance
The banking sector has demonstrated considerable resilience, but credit granting has declined to its lowest level since mid-2017 due to the weaker outlook for household finances and the outlook for credit granting appears to be moderate.

Residential loans only comprise around 27.4% (by mid-2022) of all credit, and appears to be declining as lending policies tighten due to a weaker outlook for household finances. Despite mortgages being regarded as “good” debt and relatively cheaper compared to consumer debt, screening is stricter compared to other types of credit. Documentation requirements are also more onerous.

That said, only around 14.5% of mortgage loan applications were declined in 2021 compared to 23% in 2022. Default rates also appear to have remained acceptable.

Important legislative changes
Two major pieces of legislation facing the industry are: (1) the Transfer Duty Act of 2019, and (2) the Tribal Land Act of 2018 which was enacted in April 2022.

The Transfer Duty Act has changed the duties applied to the transfer of property to being 5% for Citizens of Botswana and 30% for non-Citizens of Botswana. This has had a major impact on the property market in Botswana in that we now see a major shift to an increase in citizen property ownership and less (to almost nothing) by foreign buyers.

The Tribal Land Act of 2018, enacted in 2022 has changed laws surrounding ownership of 70% of the land in Botswana.

Individuals and companies in possession of tribal land will now have to apply to the Land Board for approval to sell their land.

The Deeds Registry issues Secure Land Titles for all tribal land which enables holders to sell or bond that land. Citizen land ownership is now regarded as 100% shareholding and any foreign individual or company buyer will require Land Board consent before a transaction can take place.

For more information, visit https://www.trade.gov/country-commercial-guides/botswana-market-overview.

Real estate outlook for 2023
We have seen the real estate market recover throughout 2021 and strengthen further in the first half of 2022. The later part of the year and into the early part of 2023 is likely to continue seeing slower growth due to global economic and inflationary pressures resulting from the Russia-Ukraine War.

The impact of the higher transfer duty for foreign buyers and Land Board approval requirements will also be felt. At the same time, while the shift is towards domestic demand for real estate, economic pressure may impact the ability to secure credit.

Nonetheless, the market is expected to remain resilient and will continue to be competitive, driven by a strong desire by the younger generation to obtain their own home.

Samuel Seeff, chairman of the Seeff Property Group visits Botswana
Seeff Botswana was delighted to host Samuel Seeff, the chairman of the Seeff Property Group recently to speak at the Real Estate Conference, held on the 20th of October at the Phakalane Golf Resort and Conference Centre. Click here to refer to You Tube link to hear more.

Seeff Botswana has been in operation for 18 years. As part of the Seeff Property Group, a leading real estate brand operating across Southern Africa, our clients benefit from advanced technology and expertise. Regardless of your property needs, please feel free to start your next property journey with us.

https://www.seeff.co.bw/