Pundits expect the property sector which posted good numbers in 2014, largely due to revaluations, to continue the good run in 2015.
In an interview with BG Business Real Estate practitioner, also owner of MG Properties, Mpho Moremong-Gobe, shared that in terms of residential segment, there is still a drive in owning properties by Batswana. “I foresee continuation of first time home owners, especially houses of the lower end of the market that is something not more than P1million. However, there might be a challenge in terms of financing following reports by the commercial banks in the previous year that there was no liquidity in the market.
They do not give out money like they used to, therefore this will impact on the customers who would wish to get loans to buy property, unless they raise the liquidity in the market. Economists will have to do something to create liquidity, “explained Moremong-Gobe. As for the top end market, there is still a selection of demand and the developers or contractors are advised to build according to the customer’s needs. On office space, she said there are quite a number of developments coming up but the speed will not be like in 2014 as much pressure was from the CBD.
At the same time having a lot of stock in the market, she said helped the rentals to go down. With regards to the retail space, Gobe said that the population is not growing therefore the shops are still sharing customers, which she said is going to split customers. As a result, the bottom line of the retailers will be affected negatively, there will be movement of tenants and this will also push the rentals. The real estate practitioner believes that the industrial segment is still in strong demand but, “we have not had a major development in this over the years. It will continue doing well, especially because land availability is scarce in Gaborone.”
Outule Bale, Chief Executive Officer at Khumo Property Asset Management also shared that from the previous year and going into 2015, more developments are coming up, particularly on commercial, retail and residential. Rentals and prices will be under pressure as a result of such developments. However, results for 2014 are likely to reflect a downward trend on rentals and values due to a number of reasons. “Firstly, supply of new stock has continued unabated across all sectors of the property market. This on its own, means occupiers and indeed buyers have a lot more choice and thus room to negotiate prices down.
Secondly, the national economy is yet to reach growth levels that preceded the 2008 global financial crisis. For the Botswana property market, which is largely driven by performance of the national economy, slower economic growth carries a negative impact.” He added that, cost of finance has been on a decline, following a similar trend as that of the national inflation. While this creates some additional levels of disposable incomes, with wages remaining flat over the same period, there have not been any significant upward changes in disposable incomes to allow for improved activity in the property market.
“Looking at the residential segment, the market top end houses stay longer in the market as the level of affordability is less. People are choosing to go for cheaper houses. The top-end residential properties will continue to experience trading difficulty. In the industrial, there has not been a lot being constructed previously, as such current trends are likely to continue unchanged,” said Bale. Given the prevailing economic difficulties, property developers/investors will be challenged to retain value of their assets by being innovative enough to appeal to occupiers and customers alike. Bale went on to explain that it is occupiers and customers who facilitate for the realisation of value/worth from property investments. As a result, focus should be on building long term relationship with occupiers rather than on short quick gains that are not sustainable.
Further observations are that, secondary properties will need to be upgraded to remain relevant to the market. Meanwhile, Turnstar Holdings has started an imminent expansion of its Game City Mall in Gaborone. The expansions will include additional retail space, a fashion avenue, restaurant areas including a food court, entertainment areas and a parkade. Molapo Crossing mall also in 2014 underwent some expansion. Other reports are that Riverwalk is planning to expand. With these considerable expansions by the shopping malls, Bale said the retails aim is to make sure that it help households to focus in one area.
“That is why most malls are expanding, they want to retain customers for their convenience and experience,” he revealed. According to the Botswana Stock Exchange listed PrimeTime Property Holdings, the annual revaluation of the property portfolio in 2014 – including the new acquisitions - showed a P39 million increase over prior year values.
The company believes that these values are reflective of the current market and are credible. “Together with the cost of new acquisitions and improvements in 2014, the total value of our properties has increased by 35 percent from P544m in 2013 to P732m in 2014. The future will continue to be exciting for PrimeTime. Now that Prime Plaza is complete we are evaluating other investment opportunities both in the Gaborone CBD and beyond. Whilst we believe that the retail space in Gaborone and other major towns in Botswana is saturated, opportunities do exist in outlying areas for retail space,” said PrimeTime Managing Director, Alenxander Lees Kelly. Another listed competitor, RDC Properties said the property market in Botswana is becoming more competitive especially within Gaborone as a result of the increased supply of available office and retail space.
There is a growing interest from stakeholders in relocating from the Main Mall and other areas to the new CBD. The strategic positioning of Masa Centre in the new CBD and its mixed-use nature will enable the Group to benefit from this concentration of businesses in the new CBD. The Centre has now established itself as a preferred destination for business travellers in Botswana looking for a one stop environment to meet their business and entertainment requirements.
In its recent market outlook research for 2015, Stockbrokers Botswana indicated that the property counters still offer good yields and still remain attractive from an income point of view. “Historically, property counters have served as a good vehicle to park in low interest rate environment as the benefit attained from decreased debt service charges flows straight to the bottom line. Naturally, we expect further price appreciation for all property counters,” reads the research.