The recent announcement of April’s annual headline inflation surging to 10.3%, up exponentially from 4.2% the previous month, has sent shockwaves through Botswana's economy. Marking the highest inflation reading since December 2022, the surge has breached the Bank of Botswana’s medium-term objective range of 3% - 6%.
However, on the ground, the property sector had already been operating under severe pressure. Effective mortgage rates climbing as high as 27%, combined with successive increases in the monetary policy rate, had quietly suppressed demand long before the latest inflation figures were released.
Junior Makopola, Head of Valuations and Investment Analysis at Seeff Properties Botswana, shares insight into what the market is now experiencing. “There is strain on all segments of the real estate market” says Junior, “and the realities of what we are witnessing are not necessarily what we thought would happen”. Junior summarises the trends in the various sectors:
High-End Residential:
The higher-end residential rental sector has been hit particularly hard. Squeezed domestic budgets are forcing premium tenants to actively downsize, while others negotiate for rental escalation waivers, or request outright reductions.
Apartment Developments:
Apartment developments that projected strong financial viability just two years ago are now facing rising vacancy rates. In response, many property owners and landlords have shifted their property portfolios toward short-term accommodation platforms such as Airbnb, further increasing supply in an already saturated and exposed market.
Commercial Property:
The commercial property sector is under similar pressure and vulnerabilities. Retail and industrial properties are struggling with inconsistent rental collections and, while yields have increased, this is not due to stronger property values. Instead, it reflects the growing uncertainty around rental income and tenant stability.
Perhaps, most surprising, is that residential rentals have not significantly benefited from potential homebuyers who have been priced out of the mortgage market. Botswana has firmly entered a new economic phase: a credit-constrained real estate environment characterised by double-digit inflation and elevated interest rates.
Junior concludes by noting that the real estate professionals who will survive and succeed during this period are those who are prepared to discard legacy strategies and adapt dynamically to the changing market conditions.
Look out for weekly market comment and insight from Kim Bekker, Junior Makopola and other members of our Seeff team.