Property outlook 2021
By Louis C. Montegriffo, Managing Director, BMI Group Ltd
This year began with further lockdowns but we hoped and expected that this was the last curve on this winding road, for Gibraltar at least. What was certainly not expected was the buoyant mayhem that unfolded during the course of the first half of 2021.
The end of 2020 did bring with it some good news in the shape of the “New Year’s Agreement” with Spain and the UK, delivering a degree of certainty for Gibraltar’s political and economic status, something which, since 2016 Gibraltar has lacked. This really was a gigantic catalyst to the events in the property market over recent months and which has seen an uplift in property prices averaging (in general terms) to approx. 7%, but up to 15%+ in some circumstances.
Over the past decade we have regularly provided appraisals on our thoughts and forecasts on the property market. Since 2017 we have highlighted our concerns with the high volume of speculative developments steered by a “studio” segment delivering hundreds of these units to the market. We have also expressed our bullishness in the market on “owner occupier” properties within the mid to high end tiers of the market and the demand for these properties. This demand has in part, been steered by an expectation of a positive outcome with regard to Brexit, as well as real growth in the market driven by applicants seeking larger homes, in their quest to base themselves in a safe, English speaking, regulated, low tax environment. We seem to be cementing this attractive proposition toward the “ultimate residency” further.
Free movement with Spain
As to the impact of forming part of the Schengen group may have on the property sector in Gibraltar, clearly the prospect of free movement with Spain under a safe political arena not seen in over three hundred years is an attractive and positive proposition, not least with a continued and underpinned financial services relationship with the UK; the future seems bright, and we welcome the agreement.
There is little one can say to try and sum up the happenings of the past year, let alone that of the past 4 years. Just when we thought that there could be nothing worse than the antics of Brexit, we are given the joys of Covid-19.
Thankfully in Gibraltar we can rest slightly easier than most due to our successful vaccination programme.
Owner occupier markets
Against all the odds, we saw price increases and sales volumes take a sharp rise throughout 2020 and an even sharper rise throughout the first half of 2021. It has been the owner occupier markets, largely two, three, and four bedroom properties in mid to high end developments showing some truly spectacular gains with some increases in excess of 15%. The higher end and fourth tier in the market generally with price ranges upwards of £1,500,000 has also re-emerged with strong activity in this sector and sales in areas such as The Sanctuary (circa £6m and offers now reaching upwards of £7m), Buena Vista Park (average of £3.5m), Admirals Place and others. Interestingly Gibraltar seems to be attracting high value profile clients, who value privacy and a safe place to reside in, “safe” in all respects, and the Rock continues to be a beacon in this regard.
Our views over the years maintain a trend: growth in owner occupier driven markets steered by a continuously growing gaming and finance centre, with stability and security adding further value.
Whereas we have been pleasantly surprised with the growth in a large part of the property sector, we also continue to remain cautious on the studio market sector given volumes under construction and imminent completions.
We took a view to stay out of this segment several years ago due to the high volume of proposed developments exclusively aimed at this product. We struggled with the prices being pitched and the marriage to an identifiable end user. It appears that to date it is the only sector that in general terms has not enjoyed the growth in capital appreciation attained by much of the market.
To be clear, we are not suggesting that the average price in Gibraltar has reached close to £1,000,000, this figure has been reached because of some high value sales during this period, which are not representative of the market in general. The truer figure based on deleting these exceptionally high value properties is likely to be in the region of £780,000 which reflects an uplift of approx. 15-20% over the period.
Growing number of HNWI’s
Outweighing all factors and reasons for the uplift is the very evident shortage of owner occupier, larger properties on the market and the demand that exists in this segment. We have been stating this for some time and advising our clients and applicants that it is this sector that remains the driving force and has resulted in extraordinary capital appreciation. Gibraltar’s average top end rate per square metre has now reached approx. £6,600 from an average of £5,700 only a year ago. In some instances rates have reached up to £9,000/sqm.
The market has quite clearly pushed its boundaries once more, with average rates per sqm increased across all tiers, but in particular at the mid to high level tiers; we also believe that the fourth tier (upper high end) is firmly placed and here to stay, underpinned by a growing number of HNWI’s relocating and staying in Gibraltar – the jurisdiction is attracting real high value homeowners.
The cost of Covid
The economy remains difficult to forecast and our exposure to the cost of Covid should not be underestimated. However, unlike many other competitor jurisdictions we benefit from a multitude of sectors contributing to the economy, it’s not just financial services or e-gaming; Gibraltar enjoys a vibrant shipping sector, and we are at the forefront in the regulation of DLT / Crypto sectors which have added huge value to our suite of services – this is only set to grow further.
Tourism is also an important pillar of our economy, but it has to be said that there is a great deal more to be done; we have enormous potential, but we have always remained behind the curve in what is a sector that should be developed to its full and in keeping with the times.
If one considers the timeline since the Brexit referendum and all the uncertainties surrounding this and Covid, it has to be said that Gibraltar has done swimmingly well. The rest of 2021 brings its own challenges but with our ever growing economy and property sector things are looking bright.