Mike Nicholls, MD of Chesterton Estate Agents Gibraltar, gives his top six predications for 2013.

Traditionally, January is the month for making predictions for the year ahead. Never one to miss an opportunity, here’s my effort in a few sectors that are close to me. The verdict will follow in 12 month’s time.

1. Residential property

The residential market is strong at the lower end and holding up well at the upper end of the price spectrum. Since King’s Wharf completed in 2010, there have been no new residential developments aimed at the lower end of the open market either at the planning or development stages. Yet, there still seems to be a steady demand for rental properties from incoming employees. Availability of rental properties below £1,500 pcm is at its lowest for a number of years. Meanwhile, in response for more and better property at the highest end of the price bracket, developers are responding, hence there is indeed some property development currently in Gibraltar at the Sanctuary and the Buena Vista Park sites.

Prediction: I think with development finance so hard to come by, this same trend will continue, that is, upward pressure on prices at the lower end of the market but with the rest of the property market stable.

2. Commercial property

From a Chesterton perspective, the commercial property sector has been the success story of 2012. We have recorded a near 300% growth over 2011 in the non-residential property sector. Investors are buying tenanted buildings. Incoming companies are very slowly, but very surely, filling the vacant office, and thereby reducing the supply. Yet other than a handful of Old Town building refurbishments, no new office buildings are likely to start in 2013.

Prediction: Office rents will continue to increase due to the demand / supply imbalance.

3. Hotel development

Just like the commercial property sector, the lack of development finance continues to prevent this sector from springing into action. There are schemes out there pretty much ready to start. But without funding, they will not start.

Prediction: Each year I am optimistic that at least one of the hotel developments will start, so once again, I will stick my neck out. A new hotel project will start in Gibraltar in 2013.

4. Gibraltar economy

Any real economic growth (that is, net of inflation), has to be welcome growth in this climate where triple dip recessions are more likely in most European countries than a recovery. The government targeted 50% growth over their four year term in their manifesto and will be keen to make inroads into that target.

Prediction: The low tax environment continues to attract incoming new business and hence employment. However, the lack of new government projects which also contribute to the GDP measurement may mean that growth is much closer to 1% or 2% per annum in real terms.

5. New initiatives

When a Gibraltar property is let out to tenants, tax is due on the rental profits, either at the company income tax rate if held in a company or at the investors’ personal tax rate. Should this Gibraltar investor choose not to buy a property but instead leave the money in a bank, no tax is due on the interest income. So the tax system dissuades property investment, which creates revenue to the government and ensures a good stock of rental property is available for tenants, and encourages bank investment which takes money out of the economy serving very little purpose other than maintaining capital ratios for the banks. The buying of property, paying of stamp duty and subsequent furnishing or refurbishment of the property, creates economic activity. Leaving money in a bank, doesn’t.

Prediction: A debate begins which considers addressing this inadvertent tax incentive to do nothing, as opposed to considering property investment.

6. Football

West Ham will finish a very acceptable 14th in the 2012/13 season and be in the top half by the end of October in the 2013/14 season. Big Sam will finally have the recognition he deserves for turning around the Hammers’ fate after coming last in the Premier League in the 2010/11 season.

Best wishes for a happy and successful 2013 in relatively tough times. Better to be in Gibraltar than anywhere else I reckon.

2012 Predictions – The Results

And here are the results from my 2012 predictions, that were published January last year.

1. Residential property

Prediction: Continued small but upward pressure on property prices at the lower to mid-market and prices static on properties above £500,000.

Verdict: Probably right.

2. Commercial property (office)

Prediction: Supply will continue to meet demand from existing businesses, and rents will not move much at all.

Verdict: Probably wrong. Commercial rents are increasing due to the lack of new supply of office space.

3. Hotel development

Prediction: Lester Hotel to lead the pack and start construction first.

Verdict: Wrong. No new hotel projects have started, nor any commercial property scheme of any scale. The lack of development finance has all but closed this sector for the time being.

4. Economy

Prediction: Positive but reduced economic growth.

Verdict: Right.

5. New government initiatives

Prediction: a more open style of government, initiatives on how to improve the Gibraltar tourism product, lower income tax to reduce the imbalance between corporate and income taxes, and a ban on smoking in public places.

Verdict: Three out of four right.

6. Football

Prediction: West Ham to gain promotion and to secure the Olympic Stadium as its home ground.

Verdict: Happily, the first one right, time will tell with the Olympic Stadium.