A local property developer has said hikes in inflation and Value Added Tax (VAT) hampers long-term development of the property market, but the forecast that the current increase in the Gross Domestic Product (GDP), and lower interest rate will boost confidence.
Records show that the GDP has grown by 4.1% in the first quarter of 2010 sparked by recovery in the mining sector. The central bank has also maintained the interest rate at 10% saying the current state of the economy permits maintaining the prevailing level of interest rates.
Willy Kathurima of Kathurima and Associates said while there is little confidence in the property sector, because consumers’ disposable
income remains tight, there is hope of recovery. “There is tremendous
confidence in Palapye due to developments at Morupule B and the University.” Though the real estate is hedged against inflation and other reactions to fiscal adjustments,
in the long run, the real estate began to feel the squeeze.

“You see, there is filtration,” he said explaining that as the 2009 downturn continued to bite, rentals
stabilised as consumers in the higher income bracket, started downscaling to occupy middle-income property, creating an over supply of high value property, but a complete shortage of lower and medium income property.
Currently headline year-on-year inflation stands at 7.1%, according
to records from the Central Statistics Office (CSO). Kathurima said despite an improvement in the general economy, the property sector would remain subdued, as consumers do not have adequate disposal income. He said the 10% interest rate maintained by the central bank would benefit mortgage loaners.
Joanna Jones, Finance Director at Time Projects, welcomed BoB decision to retain the interest rate at 10%. “We are currently in the process of financing our property development through financial institutions
and this would be a positive
development in terms of repaying
if our requests are approved,” an upbeat Jones said.
Time Projects is property and asset manager of Prime Time, the company listed on the Botswana
Stock Exchange (BSE).
“By retaining the rate, this shows that the bank is listening to market,” said the excited Jones.
She explained that the relatively lower interest rate is a good development in the sense that it would be relatively cheaper for those seeking finance to develop new property. She said the property sector would continue to record some relatively stable profits especially those with fixed leases.
“However the situation can change if the interest rate is adjusted upwards in future,” she observed. A property analyst at Khumo Asset Management, Outule Bale said by retaining the lending rate, the central bank could have varied impact depending on the industry someone is in.
“This is good to people who are currently paying mortgages,” he said. He explained that unchanged rate benefit mortgages payers in the sense that there is no increase in their loan repayment at least for now. It is also good for those who want to secure new loans for other purposes, as they would be charged relatively less as compared to when the rate could have been adjusted upwards.
Bale said the other beneficiaries are property developers.
“They would be able to secure some finance to develop new properties at stable rates,” he added.
He said the current rate encourages sales of properties in the market. According to Bale the local property market has not been hit by the recession hard. “ We only hope for the best looking forward,” he emphasised.