By Sarah Bray, Partner and Katrina Isola, Associate, ISOLAS LLP

Anyone can buy a property in Gibraltar which is on the open market. However, there are certain properties that belong to a restricted market known as the 3-year residency rule.

1. What is the 3-year residency rule in Gibraltar?

Certain properties in Gibraltar are only available for purchase by those who have been living in Gibraltar for a continuous period of 3 years. These properties may only be occupied by the owner and family and cannot be rented out. They are not suitable for buy-to-let investors.

2. Can I buy my property in the name of a company?

Yes, you can buy property in the name of a company, whether the company is incorporated in Gibraltar or outside of Gibraltar. Property owned in a company name is still subject to tax and you should obtain tax advice at the point of purchase, which we can assist with.

3. What should we consider before starting our property search?

There are many things that one should consider before starting their property search. We consider the following to be some of the most important:

• budget and financing plans;
• type of purchase: off-plan / re-sale / buyto-let;
• whether the intention is to live in the property, rent out or sell on;
• mortgage plan;
• location of property;
• parking access;
• residency requirements;
  future construction around the property;
• planning restrictions; and
• housing rules (such as pets).

4. What is the purchasing process?

This is a very broad question and can have a number of different answers depending on the type of property, for instance, whether one is interested in an off plan, government and/or the open market and whether a property is being purchased with the assistance of a mortgage or not. Therefore, a brief summary of the standard process with regards to a standard purchase and sale is more suitable:

The standard purchase process in Gibraltar begins with the agents issuing a memorandum of sale to the respective lawyers whereby usually a 2% refundable deposit is payable to reserve the property on a ‘subject to contract’ basis. Thereafter the Purchaser’s lawyer submits pre-contract enquiries to the vendor’s lawyer which will contain various questions about the property such as: the items to be sold with the property (if any), exchange and completion dates, service charges, rates, information with respect of a management company, whether the property has suffered any water ingress and whether there have been any alterations made to the property etc.. The Purchaser’s lawyer will review copies of the original title deeds forwarded by the Vendor’s lawyer to ensure good root of title and the lawyers will draft, review and approve all relevant documentation necessary for the purposes of exchanging contracts and thereafter completion.

Exchange of Contracts can either occur prior to completion or on the same date as completion. Usually, a percentage of the purchase price is paid at the time of exchange of contracts by the Purchaser to the Vendor. Once exchange of contracts has taken place the parties are under a legal obligation to complete the transaction on the agreed completion date in accordance with the terms of the agreement.

Should the Purchaser be buying with a mortgage, the Purchaser’s lawyer or bank’s lawyer (as the case may be) will prepare the deed of mortgage, liaise with the bank and prepare a report on title and request for funds in order to ensure that the mortgage funds are transferred on the date of completion.

The vendor’s lawyer will also prepare a completion statement which will apportion rates and service charges to the date of completion depending on whether these have been paid up to date or not. Once the completion statement has been approved by the respective lawyers, the Purchaser’s lawyer will request the funds for the purposes of completion. This will include (but will not be limited to) registration costs, stamp duty costs and management company/lessor approval fees.

On the date of completion, the relevant deeds are to be executed by all parties and monies transferred from the Purchaser’s law firm’s client account to the Vendor’s law firm’s client account to be held in escrow pending completion. Once the Vendor’s lawyer confirms safe receipt of monies and receives the fully executed deed, they would release the title deeds and any related documents to the property to the purchaser’s lawyer, completion is said to have taken place and keys are released to the Purchaser as new owner.

5. What is Conveyancing Property law?

Conveyancing Property Law is the legal transfer of property from one person to another.

6. What is a Memorandum of Sale?

A memorandum of sale is a form which records the details of the sale. These details include, but are not limited to: purchase price;

• property address;
• deposit paid by purchaser to the agent;
• vendor’s name, address, phone number, lawyer details;
• purchaser’s name, address, phone number, lawyer detail; and
• any other agreed terms.

7. Will my bank outside of Gibraltar give me a mortgage on a Gibraltar property?

It is possible for a non-Gibraltar lender to take security over a Gibraltar property. However, it is rare. The majority of mortgages on Gibraltar properties are from banks/ branches situate in Gibraltar.

8. Can you help me obtain a mortgage for a Gibraltar property?

In order to start the process of obtaining a mortgage, the initial application would need to be made yourself, there are a number of reputable banks here in Gibraltar, all of whom we work with and would be happy to introduce you to. We would then handle the legal work once you have a facility letter in place from the bank you have chosen.

If you are purchasing a property with a mortgage here in Gibraltar, we can assist by drafting the Deed of Mortgage and liaise accordingly with the bank and the Land Registry. Should you wish to sell a property of which you have a mortgage over that property, we can assist by drafting the Deed of Release of Mortgage and liaise accordingly with the lawyer for the Purchaser, representatives of the bank and the Land Registry, where necessary. We can also assist should you wish to up-stamp/obtain a further advance in respect of your existing mortgage.

Stamp Duty payable on mortgages or further advances secured in Gibraltar are at the following rates:

• Mortgage amount of £200,000 or less at 0.13%;
• £200,001 or over at 0.20%; and
• Releases of Mortgage are calculated at 0.03% of the original amount borrowed.

9. What is Stamp Duty payable on?

Stamp Duty Land Tax is the tax that the government charges when an individual or company purchases a property. It is payable at the following rates:

(i) 0% where the value of the property does not exceed £200,000;

(ii) 2% on the first £250,000 and 5.5% on the balance, where the value of the property exceeds £200,000 but does not exceed £350,000; and

(iii) 3% on the first £350,000 and 3.5% on the balance where the value of the property exceeds £350,000

Effective from the date of the Gibraltar Government’s Budget speech, on the 11th of July 2023, first or second time buyers in Gibraltar are exempt from paying Stamp Duty where the value of the purchase price does not exceed £300,000 (this excludes companies). Therefore, for first or secondtime buyers in Gibraltar, the following rates would apply:

(i) 0% on properties up to £300,000;

(ii) 5.5% on properties valued between £300,001 and £350,000; and

(iii) 3.5% on properties valued over £350,000

The 2023 Gibraltar Budget Speech also confirmed that the stamp duty payable on property purchases over £800,000.00 would increase from 3.5% to 4.5%. This change has not yet been implemented but is expected to do so in 2024.

Stamp duty on releases of existing mortgages are calculated at 0.03% of the amount borrowed.

10. Any extra costs to be aware of (in addition to stamp duty)?

Some of the costs that clients will be required to meet and should therefore keep in mind are:

• registration costs in registering property deeds at the land registry;
• property searches;
• sealing fees; and/or
• management company and/or lessor approval fees.

The post The need to know guide for buying property in Gibraltar appeared first on Gibraltar International Magazine.

By Louis Montegriffo, CEO, BMI Group

High value clients (Cat 2 / Hepps) continue to represent a significant part to the Gibraltar property market. Over the past few years, the jurisdiction has seen continued growth in Gaming, Insurance, Banking, and Funds. The Distributed Ledger Technology (DLT) sector and the Gibraltar Finance Centres’ foresight in regulating the industry at technology level is already proving to be hugely successful and has the makings of developing similarly to the online gaming sector, which has, over two decades been responsible for substantial growth.

Further consistent growth

Despite the uncertainty surrounding the jurisdictions place in the Brexit agreement, there are numerous fundamentals surrounding the Gibraltar economy which will underpin further consistent growth. Prices will hold at current levels and there may be further growth particularly within the upper tiers and owner occupier driven sectors.

The market has performed incredibly well since November 2020, with increase in prices to April 2022, of up to 60 percent in certain segments and high value locations. Due to huge demand and a lack of supply, there have been some phenomenal increases in prices in the larger high value properties.

Average price

In general terms there has been an average increase in prices of an 18 month period of approximately 35-40 percent. This makes the average price or property in Gibraltar approximately £900,000. Over the past five years we have also alluded to the fact that this may well play out as it has and that other segments, such as the studio market may not necessarily enjoy the same growth, due to an over-supply and a lack of suitable end users, in what is a largely speculatively driven market.

The market in the second half of 2022 slowed down in the pace of sales volumes and price hikes, which considering the pandemic aftermath, Brexit uncertainty and the war in the Ukraine is not surprising. With rising prices in most western economies and interest rate increases not seen since the 1990s, it is only normal for there to have been a degree of uncertainty and nervousness affecting the property market, in the same way other markets were affected.

A sensible 4 tier market

The developing 4 tier market (Low, Mid, High, Ultra-High) that we have reported on for the last eight years are now firmly accepted in the jurisdiction. The very fact that Gibraltar is attracting a new ultra-high segment is the clearest sign of confidence from a new emerging market. Few Finance Centres and Finance Services locations can boast such a cross section of the market.

Commercial property

With respect to current availability and stock, it is safe to say that there are options in various locations, but particularly so in older commercial properties. The offering is generally lower quality and in certain areas, compromised in terms of layout flexibility and sizes.

There is no question that an element of decanting from the older commercial properties into the newer and better designed office schemes has been the order of the day over the past 48 months. Worthy of note is the fact that letting rates/sqm have not been compromised at the higher end due to the decanting, in fact quite the opposite; applicants are prepared to pay high-end prices for high end specs. This creates an opportunity for landlords with older buildings, to upgrade and provide the market with improved offerings to market.

New modern office options will serve to improve the commercial offerings in the market and will generate new business steered by new expectation, which once again serve to underpin the positive future for Gibraltar PLC.

New off-plan developments

Currently at the time of writing, Eurocity, Marina Club, North Gorge and The Reserve are the only major off-plan developments which are under construction, with the latter two being the only ones primarily steered exclusively to the owner occupier segment. There are a great many re-sales at Eurocity, particularly studios and one bed apartments, that continue to be of the view that prices within these types of properties may suffer, with available volumes on smaller units increasing by the day.

The E1 and Forbes developments, completed at the end of 2022, has seen good movement in Forbes, which comprises of a wider range of mixed units, but E1, which is primarily studios and smaller one bedroom apartments, has seen a great many of the properties come back onto the market for re-sales and rentals.

Conclusion

Property values as indicated have grown enormously since November 2020, but we have seen this rally slow down and adjust since May 2022.

Our take on the future very much depends on the impact that higher interest rates have on the local economy and the pending Brexit agreement with Spain.

New business in Gibraltar is present and the private client space will continue to feature highly, as we see high value clients looking for a jurisdiction that is safe, proactive, low tax and well-regulated.

The post Cat 2 / Hepps relocating to the Rock fuel the property growth appeared first on Gibraltar International Magazine.

By Louis Montegriffo, CEO, BMI Group

High value clients (CAT 2 / HEPPS), and other applicants relocating to the Rock, continue to represent a significant part in the growth of the property sector. With new startups in the gaming industry, with substantial investments which suggest a long-term presence in Gibraltar; the FinTech sector and the Finance Centres’ foresight in regulating the industry at technology level is already proving to be hugely successful and has the markings of developing similarly to the online gaming sector, which has, over two decades been responsible for substantial growth.

There are numerous fundamentals surrounding the Gibraltar economy which will underpin further consistent growth. We are therefore optimistic and side on a real prospect that prices will hold at current levels and may see further growth, particularly within the upper-tiers and owner occupier driven sectors.

Re-sales and off-plan resales in completed developments such as Quay 31 and Midtown continue to be a good indicator of confidence. There is a strong indicator that re-sales in certain developments are seeing significant growth margins of up to 25%. There is a great deal of importance on the impact of off-plan sales and the quality / profile of buyers; the simple logic is, “Owner occupiers” will always drive the sector – “Let the market drive the market”.

A sensible 4 tier market

The developing 4 tier market (low, mid, high, ultra-high) as has been seen over the past six years, are now firmly accepted, and more than serves as a positive indicator of the potential of the market. The very fact that Gibraltar is attracting a new ultra-high segment is the clearest sign of confidence from a new emerging market.

Therefore, the Rock has a healthy property sector, split sensibly between the four tiers. Few Finance Centres / Finance Services jurisdictions can boast such a cross section of the market.

Commercial property

With respect to current availability / stock, it is safe to say that there are options in various locations, but particularly so in older commercial developments. The offering is generally lower quality and in certain areas, compromised in terms of layout flexibility and sizes.

There is no question that an element of decanting from the older commercial properties into the newer and better designed office schemes has been the order of the day over the last four years. Worthy of note, is the fact that letting rates/sqm have not been compromised at the higher end due to the decanting, in fact quite the opposite; applicants are prepared to pay high-end prices for high-end specs.

New modern office options will serve to improve the commercial offerings in the market and will generate new business steered by new expectation, which serve to underpin the positive future for the Rock!

Considering the recent Covid pandemic and the advent of a greater volume of employees working from home, there is a case to be made in less demand or a request for reduction in office space, particularly for the larger office users. This has not directly affected the high rates for Grade A offices being achieved, but there may be some circumstances where negotiations on rent reviews, may now favour the tenant.

New off-plan developments

Currently in Gibraltar, there are a number of off-plan developments ongoing, such as Eurocity, E1, Forbes, etc. It would be fair to say that there isn’t enough to go around when one considers the demand and the impact this has had on pricing levels.

Thankfully, due to a thriving economy, with new entrants across the board (Financial Services, Gaming, DLT & Cryptocurrencies, Private Clients), the jurisdiction finds itself in a not uncommon situation of serious lack of supply and over-demand for properties, leading to a hike in prices that had not been seen since 2007, and then again in 2013.

There is clearly a need and demand for new off-plan projects, and this will be met with the Victoria Keys reclamation and Eastside project, but these are still a while away. This will continue to harden the market at the levels and potentially at the pace Gibraltar has experienced over the last few years.

Fundamentally however, when it comes to sensible planning and knowing your market and your profile buyers, we have always maintained that a mix of owner occupiers, seasoned investors and a small measure of speculators is healthy – any overdose of the latter and you run the risk of exposing the market to an oversupply trend and in turn a property bubble.

Conclusion

Property values as indicated have grown enormously in most sectors, although these increases have not consistently mirrored GDP growth as in the past; it would be unrealistic to expect as much. The future very much depends on new business for Gibraltar, but more importantly the ability for our economy and financial services sector to continue to strive, compete and attract new entrants from other jurisdictions.

The post Gibraltar property update 2022 appeared first on Gibraltar International Magazine.

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.

The post Property outlook 2021 appeared first on Gibraltar International Magazine.

By Louis C. Montegriffo Managing Director, BMI Group

It is clear that our way of life, how we interact and how we do our business will not just be impacted for the short term but may also be with us for the medium to longer term. The fact that a great many of us are now able to work from home and are able to do so effectively will have a knock on effect on the future planning of businesses and their office space planning requirements; it will also influence how we choose to live our lives at home and how demand for property sizes may change because of this.

Changes although hard to adjust to, will invariably bring positive elements too and will have the capacity to teach and remind us of how we may take the simple things in life for granted, how we have ignored a real call for environmental change (the skies are cleaner) and how looking after our health and taking positive steps towards it can make a real change for the better; I refer to the latter as I do not recall ever having seen so many people, cycling, power walking, jogging or enjoying the many nature trails that we have locally.

The market is dead, long live the market

As outlined in our first BMI Covid-19 update in March, Gibraltar remains fully active and open for business, both in the office and remotely at home. Gibraltar has pushed hard to maintain a presence in the market.

Under the lockdown we were bracing ourselves and expecting all “new business” to grind to a halt, but were surprised with the general up take by applicants. Post lockdown this has continued.

Our focus has been to maintain and manage all existing and pending sales in the pipeline and we are delighted that all have either completed or are set to do so. We see this as a good indicator of the mindset in the market and the general view that, the market wants to continue to drive the market.

Although clearly still too early to say, we are optimistic that Covid-19 will not adversely affect the market in the medium to long term. So far, applications to let and interest in residential sales portfolios suggests that although the market is substantially quieter, there is movement in lettings and sales, albeit under a rather heavy cloud of uncertainty and somewhat different methods of showing properties listed.

There is no question that the volume of interest has slowed down, to suggest otherwise would be foolhardy, but the fact that there is activity is a positive during these difficult times; importantly, from our own perspective and akin to the sentiment taken by Gibraltar Inc, we all want to be in a solid position when we come out of this.

The market position prior to Covid-19

Prior to Covid-19, we had been warning of a slight over heating in the market in particular segments, these segments will no doubt be suffering the brunt of the impact of Covid-19; speculative markets will undoubtedly be the worst hit during down turns, but our belief in the four tier market which we have seen grow over the past two decades will hold its own and will not be dragged down by one segment of the market.

Portfolio listings in both sales and rentals in Gibraltar had seen substantial increases in volume, particularly in lettings and we had already seen a signal of adjustment in pricing, where there was already a clear oversupply in new build smaller buy to let, speculative units. Conversely, the owner / leasing occupier sector driven by larger units in all ranges, one to four bed units had held well given the lack of supply in this sector, and in some cases it experienced increased prices in sales and rentals because of this further underpinning the maturity of the sector in general.

2018 /2019 were crucial years in many respects and of course were highlighted by Brexit negotiations as a real factor on how the market would develop. New off-plan developments should be primarily driven by that fundamental sector known as the “owner occupier market”, without it there is no market and the sector falls prey to speculation. This is only further amplified under our current status quo.

We had expressed concern with proposals primed solely at the investors market and offering only one product such as the studio / small one bed unit with overly high rates / sqm. We will continue to follow and review this sector.

Historically, and during uncertain times, the safer investments have tended to feature mixed distributions of 1 – 4 bed layouts. These owner occupier lead developments have consistently rewarded investors because they (by default) reduce exposure to just one market or applicant profile, and thereby increase percentages of owner occupiers who tend to seek 3 / 4-bedroom properties; this reduces risks by splitting markets up and attracting varied profiles.

Opportunities will invariably present themselves

The Bank of England have reduced interest rates once again to the lowest levels ever, thereby providing cheaper access to borrowing. Some investors have been keen to jump into the market for the right deals, which do exist if you are looking at the medium to long term exposure.

Looking at the bigger picture and considering Gibraltar’s historic ability to overcome hurdles, there are indeed opportunities for all, and not just the savvy investor. The appetite is there, albeit overshadowed by an uncertain eye; and true to the nature of our small, diversified and dynamic economy, our innate ability to seek new goals and new markets will be sought and found.

It is the very basis upon which Gibraltar has survived and flourished in the past.

In summary

Navigating this chapter in our story is of course crucial and to date we (Gibraltar Inc) have done phenomenally well in managing the primary factor of this virus, that being the health and well-being of our health service. The government has also taken crucial steps in managing what is essentially an economy in partial levitation (the pause effect). The BEAT Covid19 facilities to business’ in real need, have provided a much-needed fiscal lung and adds a level of comfort and confidence to our economy and in the governments handling of this crisis. Their steering and management to date has been nothing short of exceptional, in all aspects, but in particular, their steadfast grip and resolve in minimising the clear anxieties we all feel, from the personal to the fiscal. We say this with no agenda, but rather a show of support and thanks; and we do so with the firm belief that this will pass and we will be stronger, wiser and better placed to emerge from this in the best possible form.

Moreover and as mentioned by the Minister for Financial Services, it will be our capacity to deal with this crisis in the manner that we are, that will earn us the respect of those seeking to invest and re-locate to Gibraltar as we see brighter days emerge; for it is the example we show during this crisis that will instil confidence in our economy and way of life for the future.

We hope you are all staying safe and doing well and wish you the very best during these difficult times.

The post Property outlook 2020 appeared first on Gibraltar International Magazine.

2017 was a hugely successful year for high and mid-range end sales in Gibraltar. Louis C. Montegriffo, Managing Director, BMI group, reports on the future property outlook

Gibraltar experienced an unprecedented and unexpected growth in sales after the Brexit referendum result in June 2016. Although some thought the market would see a downturn in 2017 due to the uncertainties of a looming Brexit and the invoking of Article 50 in March, Gibraltar actually had a strong, bullish year for property sales in terms of volume that remained consistent throughout 2017.

Why the confidence?

Investment in Gibraltar is underpinned primarily by the Gibraltar Finance Centre, with the strength in regulating financial services. It is importantly a jurisdiction that is subject to British Law and the English language as the firm basis of Gibraltar’s success.

“It is evident that the last ten months have resulted in a good volume of sales across all the segments in the market.

An element of this strength has predominantly been driven by off-plan re-sales in developments nearing completion. Prices over the period have been stable with average growth in some areas of between 3-4%. The rental market has been extremely buoyant over the period with significant increases in rents, particularly in newer developments such as Midtown, where some one beds have rents of £2,000 pcm and two beds reaching £3,000 pcm. This is mainly driven by new business (DLT / Gaming sectors) and the continued growth in HNWIs.”

What’s in store?

Gibraltar will continue to see increased off-plan stock for re-sale driven by pending developments set to complete in 2019/20. This will be primarily influenced by the volume of speculators wanting to flip their investment.

Existing stock may also be influenced by the arrival of new developments, as well as the release of ex-MoD (now GOG) stock.

Prices

In the middle tiers or upper low to mid-end of the market, prices have seen increases of approximately 9% in the 12 months leading into mid 2018. There has been a great deal more movement in the mid-end sector and we believe this is fundamentally due to the continued strength of the economy and a new wave of purchasers, both local and ex-pat first time buyers.

The upper end has seen a slight lapse and settling compared to previous years, but this is not surprising. High end clients are no doubt keeping a cautious eye on the upper end before committing to the £2 million + market, owing to the uncertainties surrounding Brexit.

New developments

West One, The Arches, Midtown, Ocean Spa, Quay 29, Imperial Ocean and Quay 31 amount to approximately 750 units under construction and coming to market over the coming months and into the next few years. Most are underpinned by the owner occupier market which usually drives the market – most have apt mixes that are spacious and are balanced between 1-4 bedroom layouts, reducing risk of over-exposure to one segment.

Further new projects have been launched and sold off-plan with more to be released. The Hub, Marina Club and Eurocity, Forbes and E1 have been launched this year and all are geared to the “buy to let / speculative investor” markets. In total there are approximately 800 units being constructed / proposed with completion dates from mid-2020 onwards.

I maintain that a mix of owner occupiers, seasoned investors and a small measure of speculators is healthy – an overdose of the latter and there runs the risk of exposing the market to an oversupply trend and in turn a property bubble.

Off-plan sales

The first large scale development scheduled for completion before the end of 2018 is Midtown phase 1. Ocean Spa and Quay 29 are both scheduled to be completed by early 2019, and others will follow during 2019/20

.

Off-plan re-sales

There has been a strong indicator that re-sales in certain developments are seeing significant growth margins and these continue to be a good indicator of the confidence or lack of on assessing whether the market has over-exposed

itself to weak speculators, and which developments may be more adversely affected by this. There is a great deal of importance on the impact of off-plan sales and the quality / profile of buyers, and the simple logic of this is, “Owner occupiers” will always drive the sector – “let the market drive the market”!

Commercial

The World Trade Centre (WTC) was completed on schedule last year and has been a huge success. The fully occupied building has added a new dimension to Grade A office space in Gibraltar, and there are talks of a possible WTC 2.

Midtown Commercial is already fully subscribed and provides a Grade A office environment in the heart of Gibraltar, with immediate access to Midtown Residential, a high end residential scheme (fully sold out) and Midtown Retail which completes this mixed use development.

The post Property outlook & market update 2018/19 appeared first on Gibraltar International Magazine.

After several years of pent-up demand from a growing workforce and increasingly affluent population, Ray Spencer, in this first of a two-part Gibraltar property report, considers whether current house building levels may risk oversupply

Private and public sector projects costing some £750m are set to provide almost 3,000 residential units over the next three years, amidst the jurisdiction’s second property boom this Century, according to research by Gibraltar International.

Geographically Gibraltar’s housing market is closest to Spain whilst economically it is closest to the UK. Both of those markets have faced ‘boom and bust’ since the Millennium – but Gibraltar has not.

The 20-years old estate agency BMI, estimates there are only around 150-170 properties for sale (before new builds come on stream), compared with 250 usually. “That is a normal level given the size of the market; any more available above that has previously resulted in downward price adjustments.”

There are few properties to rent – “rental prices have risen quite sharply driven by an expanding financial services and e-Gaming sector”, says BMI director Louis Montegriffo.  Last year a firm moved to Gibraltar with 35 families needing 2-4 bedroom properties “and we saw rents rise in a very short space of time, he notes.  “ Whereas a couple of years ago for example, you could rent a 2-bed Kings Wharf apartment for £2,400pm, today it is up to £3,300.”

This year, three large private sector projects will be completed to add 300+ housing units, primarily in rentals as buy-to-let investors look to generate a return, but also in re-sales either from speculators cashing in, or investors keen to move onto other projects. A minimum price uplift of 10% is common; sometimes it is as much as 40%.

Financing of Gibraltar’s open-market projects are characterised by developers fronting around 20% of the cost (mostly land), off-plan investors with 25-30% deposits, and banks providing 50% – but only when most planned units have been sold.  “That formula ensures projects will be built out, unlike in the UK where deposits are generally 10%, so purchasers are more likely to walk away if the market turns”, suggests Mike Nichols, Chestertons’ local managing director and development consultant.

Investors are typically achieving yields of 5.5-6.25% gross in the core buy-to-let market – but less for £1m+ properties – and costs of ownership and letting fees reduce the yield by about 1%.  Capital growth for the last ten years is 2%–5%pa.

“How property prices move over the next few years is completely outside of an investor’s control, with most being local

residents having knowledge of Gibraltar’s property market and economy, and only few as pure speculators.  I see it as a cycle – if you don’t have investors, you don’t have construction,” Nichols adds.

Some developers prohibit re-sales of off-plan contracts until all units are sold or until building completion, but delays are a feature of many projects. Almost all Gibraltar properties are leasehold and new developments have 125+ year leases with the UK Crown as ultimate owner.

“There is a shortage of homes for sale and a chronic shortage of rental properties for the army of over 12,000 workers – half being non-Spanish – who traipse across the border each day, many of whom would much rather live in Gibraltar if the right property at the right price was available,” Nichols observes.

New to the scene are several developments that feature a heavy content of “affordable” hotel-size studio rooms and small 1-bed apartments, upwards of 840 coming on stream in the next 2-3 years.

At The Hub, close to the airport runway, two years’ of work will start this summer on a 15-storey block of 143 studios measuring from 24 m2, each with pull down bed and sharing TV and games rooms and laundry facilities. “Where else can you buy apartments at an average price of £128,000 and then be able to rent them at £650-700 a month?” Nicholls asks.

Developer Tylee Properties, wants to attract first time buyers, divorcees, returning students and non-locals who have moved to the Rock for employment – “a stepping stone for young and old who struggle to get on the property ladder and can’t get on the housing list”.

Eurocity is an £80m development of 366 apartments in three blocks, where building is scheduled to begin this summer; almost four in five of the units are studios (176) or 1-bedroom (112), and 64 being 2-bedroom. All units in the first block were sold pre-launch, and now the second block, a 22-storey tower set to become Gibraltar’s highest, 143 units are being offered at prices from £165,000.

The entire mixed-use project, which also has two floors each of retail and offices, was the brainchild of Russian developer Evgeny Cherepakhov, chairman of local family business Bentley Investments Group, who was encouraged by demand in 2015 for his adjacent West One 11-storey high block of 96 apartments that has just been completed.

“We are seeing a great deal of new build taking the serviced apartment route with very small properties; the smaller they are, the higher sale cost per square metre.  The risk with this is the exposure to the speculator’s market that this type of build invariably attracts,” Montegriffo declares.

“We have some concerns over the real owner occupier / rental demand for 25-45sqm properties, and when there are potentially 500+ of them being proposed.  It is a segment of the market where we urge caution; it’s a fine balance and there could be overbuild in this segment with a negative impact on the market,” he submits.

Ocean Village (OV) developer, Greg Butcher kick-started a 5-year building boom in 2004 by quickly selling off-plan the 16-storey Royal Ocean Plaza, which opened in early 2010.  But in 2009 when bank finance dried up, so did building projects.

In 2014 OV again took the lead by launching Imperial Ocean Plaza (IOP), selling 116 apartments in a week, and followed that with two 16-storey blocks and one at 17-storeys providing a further 315 apartments.  Two more towers are being constructed – Ocean Spa Plaza and the delayed IOP – adding 241 apartments – to make five large blocks at OV.

Yet another Gibraltar ‘first’ is planned at OV: five 3-storey blocks of 144 waterfront apartments that buyers cannot occupy for 15 years!  It is believed two blocks have been presold to local gaming companies. Marina Club’s rental-only studio, 1 & 2-bed properties are to cost from £195,000.

Midtown’s 8-15-storey development of seven interlinked blocks over 4.3 acres is the largest currently and will provide 120 apartments, 7 penthouses and 18,000 m2 of offices by mid-2020.  A 1,000-space car park is complete and four of five housing blocks will be available this year having sold

high-end and comparatively large units at £400,000 to £2m for a penthouse.

The 2012 Census showed Gibraltar had circa 10,000 residential properties for a population of 32,000; 40% at that time were government rented homes, and only 1,700 were privately rented.  Some 4,300 (37%) were owner-occupied flats and 10% government co-ownership.   The government 50:50 shared ownership scheme was boosted in 2016 when two estates with 900+ apartments were built at Beach View Terraces and Mons Calpe Mews at a reported £116m cost.

“The greatest demand is for 3-bedroom affordable flats – few want 1-bed units”, says Samantha Sacramento, housing minister, who received close to 4,000 scheme applications.  Three-bed flats sold for £102,600-144,350 and buyers acquired a 50% stake or more, dependent on individuals’ affordability.  “These are very good prices.  The government builds to cover the cost, but not at a loss”, she notes.  “We are not making a profit, whereas a commercial developer will want to do so.”

Now over 1,400 more “affordable” social homes on three estates are promised for Gibraltar residents “from August 2019 until the end of 2021”. Non-Gibraltarians can only buy after 10-years’ residency!

There are “other strategies” for frontier workers, “because we recognise that there are a lot of people, working in key industries, who want to live in Gibraltar and they are not family people”. Government is encouraging developers to provide 1-bed accommodation. “When plots go to tender, people offer different ideas, and the allocation panel will want to maximise government policy”, Sacramento insists.

Mortgage availability is not a problem. State-owned Gibraltar International Bank chief executive, Lawrence Podesta, explains: “We have lent some £170m for mortgages and we can take on quite a bit more as our deposit base of over £700m is greater than expected, which means we have enough to lend another £22-30m for the Government properties and substantially more in the open homes market, subject to a tiered approach on risk levels and 50% concentration limit in any single development project.”

Christian Bjørløw, Jyskje Bank chief executive, concurs: “Availability of home loans is not an issue.  Demand for mortgages last year was quite slow, but we have seen a slightly higher demand this year.” Jyske bank had helped to finance a few large developments.

NatWest reports Gibraltar mortgage demand in line with last year, but adds: “We have financed a number of developments over the last year, which will bring more properties onto the market and future mortgages.  There is still likely to be demand from developers for commercial projects, but on a smaller scale.”

Lawrence Isola, chief executive of Europort Developments remarks: “I have some concerns about the amount of construction going on, never mind the high number of planning applications for more going in.  When this big round of building is completed, a large number of apartments will be available for rent or for re-sale with a high number of speculative investors seeking to get a return, because people think everything sells well in Gibraltar.”

Kings Wharf is a bayside development of three blocks: the first, Quay 27, delivered 130 units in 2011. At Quay 29, where 120 apartments are expected to be ready in March next year, “up to 80% are owner occupiers”, Isola asserts. In Quay 31, almost all 83 apartments priced between £350,000 and £1m were sold late in 2017 “to a list of clients known to be looking for a home to live in and not off-plan speculators”.

Residents are showing concern at the number and height of new blocks being squeezed in – 33 more by 2021 – and

protestors claim a detrimental effect on Gibraltar’s skyline, loss of light and, of course, views.

Yet still more development is envisaged, in addition to several smaller projects of 15+ apartments. The biggest in prospect is the long-awaited Eastside “Bluewater” development on reclaimed land that UK-based Cameron Developments was to pay the government £86m in 2015 to build £1bn-worth of high-end apartments, retail and office space, a marina and 1,100 government affordable homes.

In November, Chief Minister Fabian Picardo, told Parliament Brexit uncertainty had “stalled” progress, but eastside presented “a property lung” and “an opportunity for further expansion and development”. He added: “There is a possibility that the plot might grow further… for a larger development!”

OV’s Butcher plans to build circa 100 more apartments at The Reserve on the side of the Rock where there was once a casino, but four years of site difficulty has frustrated progress.  And developer Hepta expects to create a 15-storey high building for up to 77 apartments, 12 duplex penthouses, plus office and retail space at Devil’s Tongue, Queensway.  There’s talk too of further land reclamation with a mini eco-city at Coaling Island on Gibraltar’s west side, and 3 – 4 more housing projects near the airport.

The top end of the market remains slow.  A UK developer launched The Sanctuary – five luxury villas of up to 1,400m2 with 5-6 beds in a gated community high on the Rock – priced at £8.5–10m. Completed late last year, one has sold so far.

At £10.9m, the most expensive property remains an open plan 4-storey villa, New Aloes – 2014 winner of ‘Best International Property Single Unit’ – built for OV’s Greg Butcher with 7-bedrooms, 865m2 internal space, and garaging for 10 cars!

However, Montegriffo claims: “We are seeing a lot of high value clients coming into Gibraltar. People are demanding high quality, so Gibraltar is maturing; we have also seen buyers wanting larger spaces, more

sophisticated fitting out, better and more amenities.”

The estate agent perceives: “High income people see Gibraltar as something new.  Whereas we sometimes ask ‘when is it going to end, when are we going to see an adjustment that goes down rather than consistent growth’, people from overseas suggest we are only just beginning – they can see the margin here.

“A Hong Kong investor suggested our property market could at least double in value in the next 6-10 years.  When I checked, between 2000 and 2006 the market pretty much tripled in value.  We might think ‘never again’; others see the potential.”In January, the web portal www.Propertygibraltar.com reported: “Without a doubt, the cranes and the constant change in the view of Gibraltar’s skyline signify opportunities as well as building activity and point to prosperity.”

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By Douglas Villalta, CEO, Century21

While 2015 has been a very positive and nourishing year for the real estate market in Gibraltar, we expect 2016 to be even better, despite the cocktail of global uncertainty, with the main ingredients including China’s economic woes, predicted higher interest rates, historically low oil prices and Britain’s referendum on exiting the European Union and increasing tensions in the Middle East which predict a certain volatility likely to rip through financial markets in the first half of 2016.

Be that as it may, developers in Gibraltar wasted very little time switching their approach from sitting on the fence to embarking into new luxury residential developments which sold out within days of the official launch, as a result of the confidence factor and high demand in the local property market.  This will bring new listings to market with the passage of time.

The median sales prices in Gibraltar are definitely on the upswing and we expect this to continue well into 2016 at a healthy pace.

Another important factor to take into consideration is that mortgages aren’t as difficult to obtain for most buyers and therefore more homes are coming to market, as families are slowly but surely moving up the local property ladder, which is where interest rates step in.

Interest rates

All eyes are on the interest rates.

They have been so low for so long that just about everyone expects them to rise several times during 2016. We anticipate that any such increases will start off in small increments, so we will not experience a sudden impact on the housing market, but this possible increase could result in some buyers failing to qualify for a mortgage.

However, such is the resilience in the local property market and the constant demand for buying a home in Gibraltar, that the anticipated high number of buyers can offset the potential loss of those who won’t be able to qualify for a mortgage as interest rates increase.

Attractive interest rates in 2015 made buying a very attractive option over renting, and Gibraltar saw a healthy number of investor clients tapping in on the buy-to-let market. Gibraltar anticipates more of the same trends in 2016 without too much upheaval in any segment of the market.

There is also the line of thought that a rise in interest rates may result in the selling season in 2016 kicking off at a much higher pace than predicted, in view that buyers will want to lock in as low an interest rate as possible.

New off-plan exclusive developments to watch out for in 2016

Blue Water is ideally positioned between Gibraltar’s two most popular beaches on the east side and will undoubtedly be the development to invest in during 2016, as the end result will be an exclusive city within itself and adding a new and dynamic extension to the local property scene.

Boasting from the most unique and specialized super yacht marina in Europe directly on your door step which will accommodate super yachts in excess of 60 metres in length, Blue Water will also feature an exclusive 5 star hotel incorporating high end serviced apartments.

Furthermore, premium luxury buildings situated right on the water’s edge will offer spectacular marina apartments, complimented with high end retail and commercial units and hundreds of car parking spaces making Blue Water a very special and prestigious address in Gibraltar.

Buena Vista Park Villas – Phase III

Buena Vista was developed for those discerning clients who wanted to acquire a bespoke detached home in Gibraltar, incorporating private gardens with swimming pools and unobstructed sea views.

Phase I sold out before completion and the impressive Stone Block in Phase II is already in advanced negotiations with an overseas investor client.

Phase III on the lower level, consists of very spacious bespoke detached and semi-detached villas and although a high number of properties have since been sold within this final phase, there is still the opportunity to acquire one of the remaining sea facing detached villas with private swimming pool or alternatively, one of the remaining semi-detached villas.

The post A robust and resilient property market! appeared first on Gibraltar International Magazine.

Or are they??

Don’t panic people, I am not about to take issue with civil rights movements, although to be fair, we could do with our own version of Bob Dylan singing tunes at the border and blowing some sense into the wind.

No ladies and gents, I am of course making reference to the advent of NEW DEVELOPMENTS … everywhere!

Over the past few weeks and months, we have witnessed the launch, pre-launch or announcement of new schemes to hit the market, both residential and commercial. In short we are potentially looking at over 25,000sqm of proposed office development in the shape of World Trade Centre, Victory Place, and NW1 and approximately 200 new residential units with the recent launch of Imperial Ocean Plaza and Midtown.

The last time we saw such activity was between 2003- 2005, where developments such as Ocean Village phase 2, Kings Wharf, Atlantic Suites and The Anchorage took to market and between them placed approx. 450 units on to market.

So, what do we make out of this new era of property development?

The bigger picture?

It’s been a good 6 years since we saw the last dip in the market, not driven by economic recession I might add, but by pure and on occasion unadulterated speculation which left us with the near 250+ properties for sale and more lettings than we cared for. Over the period we have seen the market dip by an average of 20% (with some developments faring better than others) and rise again to beyond 30% of the position back in 2007 – a pretty serious movement over such a short period.

Back in 2011 we had hinted at the fact that the market had in effect come through the turbulent period of over-supply and we entered into a new period of real and sustained growth driven primarily by continued buoyancy in the economy, which by the way, continues at an increased pace year on year. In essence we’ve had 3 very good years which has seen the hardening of prices at all levels of our property market, plus the creation of a new tier in the market – the fourth tier so to speak, one that we call the “upper high value” market – the £1m+ range.

Demand and growth in the market over the past 36 months, has taken its toll on the portfolio of properties available. Today there are no more than 100 units for sale to the immediate home occupier / buy to let investor; which from a numbers point of view is the lowest we have seen for some time. The impact of this is clearly seen by the rate at which prices have increased, over the past 18 months.

So, it’s sensible in our view to assume that a new impetus in the market of new residential schemes is a positive, and considering the numbers involved, unlikely to drive prices down, particularly when considering completion dates of Imperial Ocean Plaza, likely 2017/18 and Midtown, likely during the same period if not earlier. So to speak, the occupier market has another 24 months to see further growth, unlikely to be at the same pace, but certainly increased rates / sqm are on the cards. This is NOT to say that the market is set to take a dip after 24 months, but one needs to take into account what up take there is from owner occupiers, buy to let investors and speculators, on these new schemes, in order to take a sensible longer term view. I’m staying on the positive side of the fence for now, albeit with a cautious eye on what to put your money on.

The target market / the product / the pricing!

One factor to consider amongst all of what is happening is the impact of the speculative market. Although there is no question that the market is in much need of new developments, given that portfolio numbers are at an all-time low since 2000; the release of near 200 units on the market will inevitably attract speculators. Who are these speculators??? Well they come in different shapes and sizes and will have different expectations, but in short they want to make a quick turn on their investment. Question is, where’s your best bet? Well, history will no doubt present its own views on this and you, the reader, will have your own preferences and opinions. But key to all of this will be; who’s your neighbour, i.e who else has invested? why have they invested? and what investment mix (type of buyer) there is? To make the point; if you are invested with a healthy ratio of owner occupiers, buy to let investors and speculators, with the latter comprising of experienced players, one would say that you’d be in good shape. If however you have invested with a high ratio of speculators, driven by quick turns – well, the risks are blatantly higher.

I am fortunate enough to be presented to clients looking to invest, whom will say, “I prefer to invest in properties that only I would be prepared to live in”….. these are sensible people in my view. It’s not just about a
buoyant market and jumping on a gravy train, but rather, what you buy with particular respect to the end product, it’s location, its view, the amenities and the layout and distribution of the property – all of these factors are key when investing in property and should not be taken for granted.

The post “The times, they are a-changing” appeared first on Gibraltar International Magazine.

“Now, one thing I tell everyone is learn about real estate. Repeat after me: real estate provides the highest returns, the greatest values and the least risk.”

Armstrong Williams

I haven’t got a clue who Armstrong Williams is, but I like his style. Although the quote does come across as a little arrogant, aggressive and somewhat misleading …(wow, this guy’s an estate agent), the fact is that Mr Williams is actually right, on the basis, of course, that you look at long term forecasts and with the exception of Spain or Ireland (sorry that was a low blow). Seriously though, the guy is spot on and history proves this.

After having ended 2013 on somewhat of a high with what turned out to be a good year for Gibraltar, with particular emphasis on high value sales, we were somewhat apprehensive about 2014. I guess this happens to the best of us and I’m sure I’ll be forgiven for thinking how one can top what was already a great year end. Although we are only in month four of 2014 as I write this, it is fair to say that 2014 has started much as 2013 ended and yes it’s the high value market that is once again showing off……or rather showing confidence.

I recently had dinner with some bankers on a fact finding mission to Gibraltar, it was interesting to hear their perspective on the Gibraltar market and learn, that by comparison to most other areas that they had responsibility for, Gibraltar really was in a league of its own when it came to the market conditions and the prospect for further growth – interestingly it was their surprise that existing mortgage books are in such great shape with no repossessions recorded for some years – something I have commented on before and which I feel is testament to the confidence across the board in the property sector.

So enough with the optimism, lets look at the facts, (see graph below) which outlines the average house price with and without exceptionally “high value” properties.

The data in our view, although positive, is also somewhat alarming given that the average house price (when including high value props) is upwards of £600,000. I’ve been involved in property for over 15 years and I have never seen the sort of spike in the market that 2013 has delivered. The graph shows a similar trend between 2006/7, with the exception that the market then was driven mainly by speculatively driven sales which subsequently led to the dip in 2008 due to oversupply and the impact of the global crisis which clearly affected confidence. What is key in our view of today’s market is that the price hike is not driven by speculation but by real demand.

Outlook & market info

The current climate continues to be positive and likely to improve further. For three years (since 2011) we have witnessed the market harden up and prices slowly improve, 2013 underpinned this further with a marked increase in “high value” sales. Demand has continued in line with the growth in the economy and we have seen property prices (particularly in the high value market) over the past three years increase by up to 40% in some areas, but averaging out at approx. 20%.

We indicated last year that we were seeing signals similar to those experienced in 1999 – 2000 when Gibraltar first began it’s boom period and which was driven by the advent of the growth in the gaming sector in which the lettings market was left with little or no stock and became the prelude to the hike in prices over the period between 2002 – 2006. It would be fair to say that this was very much the case in 2012/13 and as mentioned we are hugely encouraged by the fact that there is little speculation in the market unlike 2006/7, thereby resulting in a strong owner occupier lead property sector.

Key factors of note

^l The sales volume in 2011/2012 saw substantial increases from previous years of up to 20% and 35% respectively. 2012/13 has seen a 10% increase.

^l Volume of sales in the top end of the market increased notably during 2012 with 2013 seeing further growth in this sector of the market

^l With no high volume forecasted ‘New Developments’ in the pipeline, the market is likely to harden further.

Key related economic factors

^l There continue to be NO bank repossessions

^l Unemployment remains relatively low

^l Finance centre industry is growing from within and continues to target further international investment

From Gibraltar’s perspective it’s a
positive outlook. I do hope that you have found this article of interest and I look
forward to updating you in the future.

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