Q3 update - Aug 21

A year that began with news of yet further lockdowns; clearly not something that one would have wished for in their New Year’s wish list, 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 we have lacked. This really (in our view) has been 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. Frightening to say the least, although we had alluded to this late last year and even prior.

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.

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. We will as always review and comment on the impact of this agreement, it clearly promises to deliver a bright future for Gibraltar with a degree of political security and economic stability not seen before.

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 therecouldbenothingworsethantheanticsof Brexit, we are given the joys of Covid-19.

Without wanting to make jest out of what has been the biggest health crisis in entire generations-isitoktosay…….“fortheloveof God, someone please make itstop”! Thankfully in Gibraltar we can rest slightly easier than most.

A bullish comment spoken by yours truly at a presentation to some international investors who quite frankly are astounded by the success’ we are witnessing; and (if I may) so accurate when it comes to the experience, we have had over the past 4 years and ironically enough over the past 15 months since March 2020. There is no question (and regardless of my banter), that we are and have been so incredibly fortunate, but to a larger degrees o well placed and structured to have(in the main) done so well – and I am of course primarily referring to the property sector.

“where the world is in crisis, the Rock excels”.

Against all the odds, we have seen price increases and sales volumes take a sharp rise throughout 2020 and an even sharper rise throughout the first half of 2021; as mentioned on so many occasions in previous updates, it has been the owner occupier markets,largely two-, three- and four-bedroom properties inmidto highend developmentsshowing some trulyspectaculargainswith some increases in excess of15%.Thehigherend and fourthtier 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),BuenaVistaPark (average of £3.5m),AdmiralsPlace and others. We have been fortunate to have been involved in the large majority of high value individual sales achieved to date. Interestingly we seem 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.

Without insight into circumstances surrounding us and an understanding of the dynamics of Gibraltar, the numbers are non-sensical and you may choose to take the view that this estate agent is quite franklytaking you for aride.

Ourview ofthe why’s and the how’s is best described in the extractbelow which we wrote some time ago:

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 securityadding 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 and to a large degree negative on the studio market sector.

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.

The updated graph above now shows only the trend line for the first 6 months of 2021. This essentially is a guide based on completed and uncompleted sales throughout the period – it is nothing short of exceptional.  We update our stats annually butdue to the extreme hike in prices that we have witnessed during this period together with the volume of sales, we thought it worthy of note to use the graphic to exemplify the position.

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 only because BMI have achieved some out of the ordinary 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.

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. Our averagetop end rate per square metre has now reached approx. £6,600 from an average of £5,700 only a year ago. We have reached rates of up to £9,000/sqm in some instances.

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 – we are attracting real high value homeowners, no brass plating.

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 in our view 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 haveenormous 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.

Having said all of the above, if one considersthe timeline since the Brexit referendum and all the uncertainties surrounding this and Covid, it has to be said that we have done swimmingly and held our own immensely well. 2021 brings its own challenges and so farour position is truly quite special, our ability to overcome stands us in good stead to continue with our ever-growing economy and with it our property sector too.

We hope that with this recent write up we can give a small and educated snapshot of the market where we see the upsides, as well as some of the downsides.