After several years of strong growth Gibraltar, a British overseas territory on the southern tip of Spain, is seen as offering good value for prime property, according to a new report.
Indeed, prime property prices have increased by 15% from 2013 to 2015 with demand driven by Gibraltarian, UK and other international buyers, says the new analysis from international real estate firm Savills.
It points out that Gibraltar is among an elite and small club of territories within Europe with special and unique governance, independence and tax status. A self-governing territory with a population of 32,000, bordering a much larger neighbour, it draws parallels with Monaco.
Hybrid centres of business and leisure and located in the Mediterranean, both have the characteristics of ‘city’ and ‘resort’ and each has developed an international professional services sector and are centres of commerce in their own right.
Prices in these territories appreciated at a time when other national markets in neighbouring countries have been languishing. Comparisons with Monaco only go so far, the report explains. Gibraltar has its own unique characteristics, history, culture, and has developed on its own path.
Emerging later on the global stage, Gibraltar’s prime property market still offers value when compared to rival jurisdictions, the report says. It explains that diversification in Gibraltar’s economy has supported economic growth, generated wealth in the local economy and spurred a wave of new development.
‘Entirely new market tiers have opened up to attract the global wealthy. The hybrid nature of Gibraltar as a conurbation, destination and recreation location diversifies risk while maximising the market for property. This comes at a time when the prime markets of many world cities are at a high plateau,’ the report says.
It points out that as Monaco and Hong Kong are becoming the preserve of only the super-rich, Gibraltar has the potential to fill a gap in the Mediterranean for high net worth individuals at various levels.
‘While it may not yet have the cachet of Monaco, proposed new developments, the right investment and infrastructure could propel Gibraltar onto the circuit of the global wealthy
Gibraltar offers certain tax advantages for those wealthy individuals who make it their primary home. The territory levies no inheritance tax, wealth tax or capital gains tax,’ the report explains.
Gibraltar’s prime markets are dominated by two nationalities: those from the UK, and those from Gibraltar, who have accounted for 39% and 34% of buyers in the last three years, respectively. The remaining 26% come from across the European Union and the rest of the world, and include Swiss, Germans, Russians and Australians.
It describes Gibraltar as a place to relocate to, not as a second home market. Some 79% of the prime market is for main residences, while there is also an active investment market, accounting for 20% of sales.
Investors favour smaller apartments, the average size being 81 square meter with an average price of £436,000, compared to 120 square meters and £604,000 for owner-occupied apartments.
Property prices stand around 30% above 2009 levels and price growth has been driven by economic expansion, occupier demand and reflects the rapid growth of prime product in the new build sector, Savills says. This is in stark contrast to neighbouring Spain, where prices still remain 28% below their peak in the first quarter of 2008 high.
‘In spite of recent price growth, Gibraltar’s prime markets are still developing, and price differentials with competing territories grant it some competitive edge. Super prime prices in Monaco are seven times those of Gibraltar, for example,’ the report says.
However, the picture is different for those in the mainstream markets on local incomes where affordability is a constraint. Some 9,400 workers live in neighbouring Spain and commute to work in Gibraltar on a daily basis. The government has attempted to tackle this with co-ownership properties, which accounted for 10% of all stock at the time of the last census in 2012.
Indeed, Government rented properties made up 39% of all properties, catering to mid to low income households. There has since been delivery of several thousand additional properties into the co-ownership sector, with more in the pipeline in the coming years.
Gibraltar has a strong rental market. Across the whole market some 15% of stock is privately rented. This figure rises to around a third on newer prime developments. There is strong demand in the £800 to £1,500 per calendar month range from relocating executives.
The report points out that Gibraltar has not seen the yield compression experienced in many major world centres and yields are relatively high, at between 5% and 6% for prime property, and 6% and 7.5% for main stream property. ‘This reflects strong rental demand, and from an investor perspective, a risk premium over future economic development,’ it adds.
Reference: http://www.propertywire.com/news/europe/gibraltar-real-estate-market-2016022611610.html