The Mercer 2024 Cost of Living Index ranked Gaborone number 215 in the list, suggesting the capital is amongst the cheapest in the world. The index is based on the dollar's cost of a basket of goods and services which include food, transport, and accommodation.
The Mercer Cost of Living Index ranks the cost of living in different cities in the world comparing the price of basket goods on a dollar basis and ranking them from the costliest city to the cheapest.
“This year’s ranking methodology encompassed 226 cities across five continents. It assessed the comparative costs of over 200 items in each location from housing and transportation to food, clothing, household goods, and entertainment,” the report reads.
According to the researchers, many countries in the world have been facing surging prices in the housing market, mainly driven by supply and demand forces, as many people migrate to urban centres in search of better standards of living, particularly in Africa.
“A contributing factor to the cost of housing is a shortage of housing relative to the number of people looking for housing. “This mismatch between supply and demand is driving prices up for international assignment logistics. “Such costs can be particularly challenging in areas with high population growth or with limited land available for development,” the report revealed.
Despite Gaborone being flagged as a “cheap city”, this is only in comparative terms to what is happening around the world.
The country’s largest commercial bank, First National Bank (FNB), in a recent property market report, revealed that demand for housing in 2023 continued to outstrip supply, especially in major urban hubs, exerting pressure on prices. The disparity between supply and demand is anticipated to persist in the short to medium term, bolstering price appreciation, and thus pushing the cost of accommodation up.
“Gaborone stands out with a significant surge in rental rates, particularly in the three and four-bedroom segments possibly driven by families seeking spacious and accommodating living arrangements during times of transition,” the report established.
More recently, BIHL, in its financial results statement for the year ended December 2023, noted that a price bubble appeared to be developing in the property sector.
“The risk of asset bubbles remains prevalent, with the property market seemingly having begun heating up from a pricing perspective,” BIHL directors stated.
A housing bubble occurs when the price of housing rises at a rapid pace, driven by an increase in demand, limited supply and emotional buying. Typically, it bursts when interest rates start to rise again, wiping out demand, as happened in the United States, leading to the 2008 global financial crisis.
