Housing market faces bleak future

Lower interest rate regime has negatively impacted housing sales, says the Chief Executive Officer of Botswana Housing Corporation (BHC), Reginald Motswaiso. Speaking at BHC’s annual housing conference that was held at the GICC this week, Motswaiso said commercial banks were not lending at prime currently, with the lowest prime standing at 3 percent and the highest prime plus 6 percent for mortgage loans.

“This has made it difficult for consumers to borrow and acquire property as the threshold to qualify for a loan has gone up,” he noted. Earlier this year, the Bank of Botswana (BoB) cut interest rates by 1 percent to 6.5 percent. The central bank said the current state of the economy allowed for the easing of the monetary policy to support economic activity. In December 2013, the lending rate was also reduced by 0, 5 percent.

Motswaiso emphasised that the cut in the interest rate had negatively affected economic activity, especially in the capital-intensive property market. He pointed out that while banks had now taken steps to attract deposits, they were selective in granting credit and increasing the cost of borrowing through high interest rates. BoB also recently reduced the Primary Reserve Requirement from 10 percent to 5 percent, thus releasing P2.3 billion to commercial banks. However, Motswaiso said the measure might not benefit consumers. “Banks may decide to use the money to cover their internal operational processes,” he noted.

Further, he said the recent increase of civil service salaries by 6 percent was unlikely to cushion them against inflation as their salary values had eroded over time, considering that it was the first increase in five years. “We therefore don’t foresee change in purchasing patterns, especially among government employees who constitute the majority of the working population,” he observed.

Meanwhile, the Permanent Secretary of the Ministry of Lands and Housing, Thato Raphaka, says BHC is still haunted by unavailability of affordable housing. Speaking at the same conference, Raphaka said the challenge was exacerbated by expansion of urban areas and lack of supporting infrastructure that could promote growth. He added that affordability was also eroded by lack of policy and systems that could effectively encourage purchases. High land servicing costs had also contributed as a major catalyst in slowing down land servicing, becoming a contributing factor to high pricing rates as well. “We cannot achieve prosperity for all when over 25 percent of Batswana are in need of housing,” Raphaka noted, adding many more Batswana cannot afford decent shelter.

He disclosed that to try and remedy the situation, government was working on cluster land banking and settlement planning through a growth point strategy. There will also be use of the Public-Private Partnerships (PPPs) in provision of infrastructure to facilitate housing delivery and economic development.