Reports Indicate That Low-Income Housing Shows Promise for Investors

Pic: Newman Real Estate

• Low-income segment has strong demand with rising rental prices

• The luxury market is now oversupplied which may push rental prices down

Reports by Knight Frank and Riberry highlight key factors for investors entering Botswana’s residential property market.

The low-income segment has strong demand with rising rental prices, while the middle-income segment faces weaker demand and supply challenges.

The luxury market, boosted by transfer duty reductions, is now oversupplied, which may push rental prices down.

Investment Returns: 

Knight Frank notes that residential yields range between 4-5%, positioning this sector as the lowest-yielding among all property asset classes in Botswana. 

“Botswana’s residential property is very volatile and the return on investment is very low when compared to industrial and commercial properties,” Far Property said in its 2024 annual report.

Letlole La Rona divested from the residential property sector because returns were not meeting its threshold.

Market Trends (Q1 2024) The Ribbery report highlights several key trends:

The residential property sector presents a complex picture, with Knight Frank reporting continued market growth supported by economic stability, while the Ribbery Q1 2024 report indicates recent market softening which it said is evident from the rising number of properties available for rent and declining house prices.

The average residential property price stood at P854,000 in Q1 2024, showing a 4% quarterly decline, according to Riberry Report.

Market Segmentation:

The market shows distinct characteristics across different segments:

High-End Segment:

• Increased demand driven by Transfer Duty Act amendments, according to Knight Frank article of July 2024.

• Reduced duty rates: 10% for properties up to US$ 145,000 (≈P2 million) and 15% for properties above this threshold

“The revised rates have stimulated interest and activity in the luxury residential segment,” Knight Frank said.

• ·This segment is currently experiencing oversupply, according to the property companies, posing barrier to entry in the space.  

  
  

“There is an oversupply of upper-end properties, leading to a possible decrease in the rental prices of these houses,” Riberry said.

Middle-Income Segment:

• Weaker demand and supply in rental market, according to Riberry Report.

• Supply challenges in Gaborone (Knight Frank)

Low-Income Segment:

• Knight Frank and Riberry are of the view that demand is outpacing supply in Gaborone

• Riberry said the rental market for low-end properties continued to show reasonable demand.

Also read: Real Estate: Residential Property Flexes Its Mettle, Botswana's Real Estate: Retail, Industrial Sectors Catch Investors’ Eyes