Gibratlar Property – No room at the inn

A phenomenon not seen for a good few years has returned to the Gibraltar property scene. Since the start of the new year and in each of the commercial, residential sales and residential lettings sectors, we have encountered a variety of gazumping instances from other parties interested in the same Gibraltar property.

The first example was on a residential apartment where the price was agreed between the buyer and the seller and the legal conveyancing process was underway. The vendor was still allowing viewings and he received a higher offer. Dilemma or no brainer? The vendor accepted the higher offer and the first deal collapsed.

A few weeks later we experienced a similar scenario but on a residential letting, which is far more unusual. This time, our client met the asking price but on the same day, the landlord received a higher offer from another agent. During the following 48 hour period there was some counter-bidding and the landlord agreed better terms with our client. For this to have happened on a rental (as opposed to a sale) is quite revealing.

Take a look at any of the main agents’ websites and look for the availability of residential property rentals. The number available is at the lowest it has been for many years and in my opinion this trend is set to continue. At Chesterton, we maintain records of the Gibraltar property supply and presented graphically, there is a clear downward trend over the last few years.

During the property development years of Ocean Village starting in 2003 and King’s Wharf completing in 2010, nearly 1,000 apartments were built for the open market. All of these have sold and are therefore owned or rented. That means 1,000 new occupants came into the property market during those years. This trend has continued, say 150 – 200 new residents for these type of properties each year, yet no new properties have been built or are due to be built on a large scale. So any slack in the market has been absorbed and the availability of rental apartments is now at a minimum.

This explains why we encountered some gazumping in the rental sector for the first time. And explains why it is going to become harder to place incoming employees and high net worth individuals wishing to reside in Gibraltar. In my article last month I commented on how supply and demand imbalance this would impact prices and buy to let yields for investors. My point in this article, is that Gibraltar will soon be posting a “No Vacancies” sign at the entrance because that is where we are heading unless we can unlock some bank finance to encourage property developers back into the market and / or entice vendors to become landlords.

The third example was in the commercial office sector. Two companies vying for the same well-presented large office space. There could only be one winner and unfortunately the party that didn’t secure the property has had to return to the market and select an alternative. There is excess demand around with companies still moving in to Gibraltar. And it’s the same story, there are no new office developments being built and hence the new supply is coming exclusively from the refurbishment of some of the older buildings in and around Main Street. Rental prices are increasing and the choice for the companies seeking to expand ormoving into Gibraltar reduces virtually by the week.

On the face of it, it’s a nice problem to have. The attraction of Gibraltar continues across international borders. Companies relocate here bringing jobs and increased economic activity locally. However, there must come a time, which is possibly quite soon, when we are losing out to other jurisdictions in our desire to attract companies or individuals, due to the price or lack of availability of suitable accommodation.