Gaborone homeowners push borrowing limits
Lewanika Timothy | Monday November 2, 2026 06:00
The Bank of Botswana’s latest Household Indebtedness Survey shows that the local property market average loan-to-value ratio rose from 86.2% in the previous survey to 93.7%. The increase comes against signs of a softening residential property market and higher borrowing costs, which could place homeowners under greater financial pressure.
At the latest ratio, property owners in Gaborone with a home valued at P1 million are about P937,000 in mortgage debt, leaving P63,000 in homeowner equity. Any decline in the property’s value could quickly erode that difference, potentially leaving the owner owing more than the home could fetch if sold in the market.
“Overall, the high average LTV ratios observed in Gaborone and surrounding areas suggest greater borrower leverage, implying elevated credit risk exposure for banks in the event of adverse shocks to property values or household incomes,” BoB researchers said.
Loan-to-value measures borrowing against the value of the property securing it. A higher ratio means a larger share of the property is financed through debt, leaving the homeowner with a smaller ownership stake, which serves as a security buffer in case of a fall in prices.
Researchers found that the trend observed in Gaborone was different from areas outside the capital, where the ratio fell from 74.7% to 70.1% over the same reporting period. Researchers said the improvement outside Gaborone could reflect buyers contributing more of their own resources or higher property valuations relative to outstanding loan balances.
In the capital, however, banks' willingness to finance a larger share of property values partly reflects confidence in the urban market. Researchers said stronger demand and the relative ease of finding buyers gave lenders greater comfort about recovering their money should borrowers default.
“The comparatively higher LTV ratios in Gaborone and surrounding areas reflect lenders’ comfort and willingness to finance a larger share of the properties due to stronger urban property markets which provide confidence in the sufficiency of the collateral for the loan should borrowers default, as well as the comparatively better liquidity of the urban properties due to more potential buyers and reliable property value,” researchers said.
Despite the bullish confidence on the Gaborone property market, researchers warn of concentration risk as the economy continues to navigate an uncertain economic path.
BusinessWeek previously reported that the residential property market was expected to soften as expensive loans and weaker economic conditions constrain purchases and development. Local property firm Riberry shared its market findings showing that the property market had endured a 9.9 percent quarterly decline in the average price of residential properties sold in the third quarter of 2025.
The decline reflected lower average selling prices in Greater Gaborone, Greater Francistown, and Selebi Phikwe. The research does not establish that every property lost the same proportion of its value, but provides context for the central bank’s concern about borrowers’ exposure to weaker prices.
The latest indebtedness survey also shows that average mortgage interest rates rose from 8.5 percent in 2024 to 10.6% in 2025, adding to the cost of financing property.
For homeowners, the combination of substantial mortgage balances and higher borrowing costs can become particularly difficult if household income falls. Those forced to sell may find that the proceeds are insufficient to settle the outstanding loan.
However, researchers cautioned against viewing higher borrowing solely as financial distress. Access to mortgage finance also allows households to acquire assets, develop properties, and earn rental income.
“In some cases, households may leverage accumulated housing equity to finance property development or acquire additional investment properties that generate rental income, reflecting productive use of credit, to the extent affordable,” researchers said. “As such, higher LTV ratios may indicate both increased indebtedness and enhanced access to finance for asset accumulation, and wealth creation.”
BoB’s overall assessment is that household debt does not currently present elevated systemic risk.
Nevertheless, researchers warned that prolonged economic weakness or further pressure on household incomes could undermine repayment capacity, making closer monitoring of mortgage exposure and loan performance necessary.