The Gibraltar Property Market – We knew this would happen

The other day, I was flicking through some of the back issues of the Gibraltar Magazine that I had lying around in my office. I came across my property article in the July 2010 edition, explaining the state of the Gibraltar property market at that time. Nearly three years on, it makes for quite interesting reading:

“In 2006 and 2007, investors were lapping up off-plan investments in the Anchorage, Ocean Village phase two, Filomena House and King’s Wharf. That represented over 400 new apartments, an addition of over 3% to the number of new residential units in Gibraltar. In the last 12 months all but King’s Wharf have completed and with the odd exception, the market has absorbed these apartments. King’s Wharf will complete just over 100 more apartments within a few months and I would predict that the market will absorb these as well over a period of, say, 6 months. That means, even in this climate, our property market can absorb c 250 new apartments per annum. And this excludes the government’s own schemes.

As it takes a good three years to achieve planning consent, development funding and then to construct anything of any size, and as there are no new large scale residential developments in the pipeline after King’s Wharf has completed, then assuming current market demand of 250 apartments per annum continues, we will return to demand exceeding supply, which tightens the market and forces prices higher, a key ingredient for the buy to let investor.

Letting activity continues to underpin property values. First time buyers struggle to achieve the deposits required, and sufficient companies in Gibraltar employ overseas staff on relatively short term contracts, so currently there are seemingly enough tenants to rent these new properties.

Meanwhile, vendors have to compete for the fewer buyers in the market. Those vendors who can, will hold on or rent. Those who cannot, and must sell, have to discount a little. Therein lies the opportunity for the buy to let landlord.

For the experienced residential landlord, conditions are arguably quite good. The low loan to value given on mortgages discourage the amateur landlord from returning to the market. Interest rates are at historical lows and although bank lending margins are high, the overall price of debt remains good value. Tenants exist in good numbers because would be first time buyers cannot get a mortgage so are forced to rent. And there are pockets of opportunities around Gibraltar to buy at keen prices.

The brave, the wise, the experienced and the adequately resourced, will soon be back on the Gibraltar buy to let trail.”

Those who heeded that advice are now in a good position. Gibraltar has all but run out of (open market) apartments available to let and Chesterton has a waiting list of would be tenants longer than ever before. Rents are edging up now, starting at the lower end and this effect will move up through the price brackets over the next few months.

Mortgage opportunities are still available at historically low interest rates.

So those who wish to, or need to rent for tax residency or for close proximity to their workplace may now have to purchase instead of rent. Otherwise, they will be forced to live in Spain which creates tax and administrative challenges and a different lifestyle.

In November 2012, Chesterton closed on a sale of a one bed apartment in Ocean Village at £215,000. The buyer got cold feet and backed out. That same apartment has just sold for £238,000.

Back in July 2010, I suggested investors would have to be brave, wise and experienced to purchase a buy to let apartment. Those who did, were wise. Prices are rising at the lower end, forced up by tenants unable to find a rental property. For those adequately resourced, opportunities remain in the prime buy to let sector, but before long, these opportunities will be lost to others.

It’s a good time to buy in Gibraltar. And Chesterton can of course, provide the buy to let guidance.