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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