of the Property Market in Botswana

Sad but true, pick up any Advertiser and the first thing you are confronted by is 'Plot For sale in Block 8 P350,000'. And you are like okaaayyyyeeee. This is the situation as it is in Botswana. We are in a property market bubble and we cannot even fathom it. The crash is imminent but nobody can really predict when and when it will hit. As with any economic cycle, and the theories thereof it has to come tumbling down like a pack of cards. Those who have been accumulating cash in their coffers will rub their hands in glee and systematically and methodically grab every land that is available like Donald Trump.

Back to the topic at hand. What are the causes of the soaring property prices in Gaborone? Especially residential? Your guess is as good as mine - DEMAND. Economics 101 teaches us if the a product is scarce or in demand its price should go up. We know from the chart in theory people will avoid buying a good if the price is high thus pushing its quantity demanded down.

In this instance, Batswana have woken up and realized: ÓMG! Owning property is a form of investment! property APPreciates! and a motor vehicle DEPreciates! If i rent out peopl occupy and I have constant stream of income! mmh!'

 So then when you have a collective thought pattern that reverberates through out éverybody wants a piece of property. When those particular somebodies want property ONLY located in Gaborone the situation gets to where it is now. Vacant & undeveloped plots selling for ridiculous amounts

The other prominent and thought provoking factor is Land Allocation Inefficiency. I capitalized the letters to try and drive the point home. Right now in Botswana, people need land. The policy mandare for Lands & Housing was to provide Batswana with land - freely. That is hardly the case as one applies for a plot and waits 10 years before they can be allocated. This is a problem, a major problem in major rural areas and more especially urban areas. In Gaborone for example to get a plot here its either through purchase or SHAA.

The development of CBD is also causing a mass exodus of tenants from existing commercial properties. They are vacating the premises they used to rent and occupying their own office space. Evidently the long term benefits outweigh short run high capital costs (development). To prevent the commercial property becoming white elephants, real estate agent have are on a selling frenzy, before even the foundation is set, an office is already sold to the prospective tenant or owner occupant.

I noted an article on Sunday Standard by our Honorable Finance Minister cautioning the property valuers not to overprice property as this is a sure fuel to a property market crash. I commend him for that because prevention is better than cure, by preventing the crash many indicators in the economy could be not affected. 

More can be done though because as it is we are not privy of how the real estate valuers come up with the valuation metrics. The eager client is just willing to sell or buy a house and they just perform a valuation report. The underlying metrics behind the value are not analysed or scrutinized to really appreciate where the inherent value is. I for one would vote for use Mortgage Backed Securities to be traded on the BSE (Botswana Stock Exchange), maybe the market will have a jolt and start being overly active given the property market activity. This will be my next subject of discussion.

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