After Prime Minister Theresa May has triggered article 50 of the Lisbon Treaty, with all its advantages and disadvantages, what are the immediate and not so immediate consequences with regards to Gibraltar property market? The plain truth is that nobody really knows at present, however, there are some indicators which can help evaluate some of the odds.
There is a feeling that there might be a stony road ahead with possibly large queues at the border and more difficulties than we face right now. But this is not new and we know about it, nobody is going to be taken by surprise. Au contraire, most locals probably believe it is back to “business as usual”. But hopefully, our politicians will continue their constructive work as well as their counterparts on the other side of the border and that they both realize that that the UK and Spain have massive social and economic interests in common and that constructive peace and a good relationship is a highly desirable asset by all members. It is therefore quite possible that a positive agreement is reached where possible.
At the moment, the feeling is that the market could very possibly stay where it is right now: solid and stable. And it could stay like that for years to come. Personally, I cannot see the Gibraltar property market making drastic changes. My point of view being based on the following points:
Gibraltar is a small market with a limited offer of property. Demand is or seems to be directly connected to a short supply. So this very fact seems to make prices quite stable. And therefore investors and private buyers feel comfortably safe with their Gibraltar investments. This applies to both residential and commercial property.
The yield on property investments for those who are looking for a good and steady safe income is a very attractive and handsome 6% to 9% and sometimes more. This makes investments here quite desirable.
The taxation system in Gibraltar is very reasonable. Corporate tax is merely 10%, amongst the lower in Europe without being a tax heaven. Hungary, Lithuania, Bulgaria being at more or less the same level. And income tax is lower than in most of European Jurisdictions. With the added bonus of no inheritance tax to account for or any capital gains tax in most cases. This tax factor is an extremely important point to account for when it comes to investing in property.
The so called “paperwork hurdle” is very simple and practical. The system is user friendly so in general it is much easier to buy in Gibraltar than in other markets. And again, very attractive for buyers both local and overseas.
Residency status. High net worth individuals need to buy or rent prime property to comply with Gibraltar regulations and therefore obtain the different advantages of relocating to Gibraltar. This benefits the market, no doubt.
Several markets in one town. Gibraltar has not got one single buyers’ market but several: The local market which needs housing, the CAT 2 market (mentioned above), the overseas market which seems to be growing and possibly a more future substantial market from Mainland UK who could see a clear investment opportunity in Gibraltar without a currency fluctuation risk factor that yields a healthy rate of return plus no language barrier and balmy Mediterranean weather…So all these markets put together keep the sales flow running steadily.
Finance is right now very competitive as far as interest rates are concerned. Banks will consider lending via mortgage loans and will look into a maximum of 90% for personal buyers who are end users or up to 75% for rent for income investors. All the above cases, subject to status as anywhere else. This can play a major role and certainly benefits the market flow.
If all the above mentioned reasons are taken into consideration plus the fact that most new properties are well designed and built plus the strict protection laws that exist in Gibraltar for properties bought on plan for future delivery, there is no reason to stop a buyer or investor from buying a property in Gibraltar which looks, de facto, as solid as a rock. And why not say that it should do very well in the mid-long term. Prices have gone most of the time up-stable-up-stable. And will probably stay that way for a long while or raise further if demand is stronger that supply. We all know that across the border prices are lower and that an investment could be made abroad in lieu of buying locally. But we all know as well that it is not quite the same and that the convenience of buying inside Gibraltar makes it in general more attractive if you have the means.