Property market resists subdued economic environment

Lewanika Timothy | Monday May 29, 2023 06:00

On the up and up: Demand in the residential space remains healthy, while the commercial sector in areas such as Gaborone is showing signs of weakness

Analysts at Stockbrokers Botswana say despite operating in a stiff economic environment, the local property market has remained resilient and showed signs of recovery from the shock caused by the COVID-19 pandemic.

“The fourth quarter of 2022 saw the recovery of the residential market sales after peak inflation was reached in the third quarter,” Stockbrokers analysts said. “The recovery of the property market is expected to continue as inflation estimates are expected to go down every quarter in 2023.”

The fortunes of the property market are reflected in various counters listed on the Botswana Stock Exchange (BSE), which enjoyed solid performances across their reporting periods last year.

According to Stockbrokers’ analysis, in 2022 entities such as the Far Property Company saw revenue rise 7.3 percent to P75.1 million compared to P69.98 million in 2021. The value of the company’s portfolio increased to P1.46 billion up from a total of P1.38 billion in 2021, while the group’s balance sheet increased from P1.45 billion to P1.51 billion.

The analysts however noted that in the residential sector, the COVID-19 pandemic prompted many homeowners to sell their properties under the asking price. Due to the uncertain economic environment, there was a rise in the number of homeowners selling high end properties due to pandemic-fuelled pressure on their incomes, leading to a decline in prices in Botswana’s high income residential property sector.

“The average price of residential properties sold in the second quarter of 2022 decreased by three percent to P836, 062, compared to the previous quarter. “Demand unfortunately is outpacing supply,” the analysts said.

In retail, Stockbrokers’ analysts said the sector has seen sustained occupancy levels due to the flexibility of landlords with regards to rental charges. This, they said, has helped protect retailers from the impact of pandemic driven lockdowns. The sector was also exposed to the fall in real household incomes, which came about as a result of rising inflation.

The analysts said COVID-19 pressures have eased in the office sector, as employers see employees return to office locations and some employing a work from home hybrid system.

“This improvement in activity has reduced the rise in property vacancies and possible job layoffs. “Continued interest rate hikes would create uncertainty to investor demand and escalating construction costs could be a challenge for companies that are looking to expand,” the analysts said.

Land rights activist, Gilbert Sesinyi, however told BusinessWeek that the performance of the property market in Botswana as depicted by the Stockbrokers’ analysis, is in stark contrast to its true potential. He believes that investors have focused all their attention on state-owned land, forgetting to develop and invest in tribal land.

“If you consider the value of land around the Gaborone metropolis and compare it with the value of property around Tlokweng or Oodi, pound for pound the so-called villages on tribal land are worth more,” he said. “Unfortunately tribal land is being mismanaged and poorly delivered.”

Sesinyi said more Batswana need to be roped in to participate in real estate activity. For this to happen he suggested that government must overcome stumbling blocks in the use of tribal land which constitutes up to 70% of the land in Botswana.