Homeowners cash in as property refinancing surges
Lewanika Timothy | Sunday November 9, 2025 12:32
The local property market has been a cash cow for investors, with property valuations growing year on year especially in the residential segment. This growth in valuations has given property owners more equity as they can now borrow against the rising value of their homes and benefit from low-interest mortgage loans as compared to high-interest unsecured personal loans.
A household indebtedness survey carried out by researchers at the central bank found that mortgages issued by banks were increasingly going to refinancing existing properties as opposed to financing new developments. Researchers at the central bank lauded this move as a growth in the local market but also warned against potential bubble bursts if the economy goes south.
“The rise in refinancing, from 46.5% in 2023, indicates that households are tapping into their property equity to finance other projects and investments. This is necessary for the deepening of the domestic financial markets as it unlocks value and has the possible effect of igniting the development of financial products,” the researchers noted.
They, however, added: “On the downside, refinancing that does not improve the underlying asset value could increase Loan to Value with potential destabilisation effects in downturns.”
Refinancing allows homeowners to borrow against the value of their property, either by replacing an existing mortgage with a new one or by taking out a loan on a fully paid-off home. The bank uses the property as collateral, lending up to a portion of its market value. This lets households convert home equity into cash for other needs, such as business capital or debt consolidation.
However, it also increases their overall exposure to debt and property market risks.
The BoB, in its research, found out that for mortgage financing, 50.3% of the mortgages issued by banks in 2024 were used for new purchases and development projects, whilst the rest were used to refinance existing property.
Financing loans for existing properties means that banks are increasingly borrowing against a value attached to those properties today, but if the business cycle is to change and contract, that value diminishes and the value of the loan will not match the property hence the bubble bursts that have happened elsewhere in the world especially in 2008 in the United States.
Another report by the Bank of Botswana found that the average cost of a family home in Botswana soared to P1 million in the last quarter of 2024, signalling a strong bullish trend in the residential property market.
Rental prices followed suit, climbing to an average of P5,000, enriching investors but pushing home ownership further out of reach for the average Motswana.
Property prices have been rising across all segments particularly the residential market in Gaborone, with market watchers warning of concentration in the urban area.