Liquidity constraints slows residential market
Keikantse Lesemela | Thursday January 29, 2015 15:12
Vantage Properties director, Sethebe Manake told Mmegi Business that the sector was most affected by this change because of its reliability on household income and individual affordability. “This is a sector which has a high transaction rate therefore more volatile when changes in the market happen,” she said.
Liquidity has considerably dried up in the banking sector, dropping sharply from 2006 when excess liquid assets made up 45 percent of bank assets to just six percent by the end of 2013.
The loan to deposit ratio has also shot up to over 80% from 35 percent in six years due to the high uptake of loans without a corresponding increase in deposits.
She added that financers had since become stricter. “Financiers are becoming more strict. In 2013 they were still flexible and optimistic about the market without facing the reality of liquidity challenges although interest rates were the same in the two years with a slight change towards the end of 2014,” she said.
In the previous years, commercial banks were more flexible in processing offered mortgages as financers shifted towards secured lending than personal loans.
According to Manake, this presented an opportunity for people to buy property as mortgage were now becoming affordable with the prime rate having dropped from 16.5% to nine percent in the past five years.
Launching the Botswana Property report on Tuesday, which was produced by Vantage Properties in conjunction with Real Estate Institute of Botswana, Manake said the land ownership frameworks and regulations around the use of land are one of the best in Africa as some African countries come to benchmark in Botswana. “Batswana are not aware of this and the world does not know this.
This report makes a significant contribution to development thinking by describing specific drivers of property market transformation and suggesting practical solutions to some challenges faced by the property market,” said Manake.
The report discussed the past global and economic trends, government spending trends, real estate funding and profiles different regions in terms of the opportunities to look forward to. Manake further said the report was produced in view of the growing need for property related information that helps consumers and businesses to make informed decisions such as investing, purchasing financing and leasing property. “Botswana’s property market is one of the best performing in the world but not enough is being done to highlight this to the world,” she said.
Botswana Investment and Trade Centre chairperson, Victor Senye said since investors had to make informed decisions before making any investments, this report would help them learn more about the property market in Botswana.
He added that when one invested in property, they could expect an income stream and value appreciation in the long-term. Senye further said since the growth of the property market as well as favourable interest rates, the banking sector was faced with the pressure of increased competition, as interest rates were low.