Last month the Chief Minister Fabian Picardo delivered his first budget. He was able to announce forecast GDP annual growth of 5.1% and a budget surplus of £31m. In both relative and absolute terms, that is a great performance from Gibraltar PLC in these difficult economic times.

In my view, Gibraltar’s 2012 Budget was balanced and fair, with few shocks, which is good for the business world. Stability is important, and that is pretty much what we got. Gibraltar was, and remains, a fantastic place to conduct business in the EU.

From a property perspective there was minimal direct impact. Stamp duty rates on property purchases were untouched. I had hoped that the lower threshold of £200,000 would increase, but that didn’t happen. However, mortgage interest tax relief was increased to a maximum of £350,000 from £300,000, which is a welcome benefit.

In my June article in this magazine, I suggested that the tax system could be used, either as a carrot or a stick, to encourage landlords to refurbish empty properties so as to make them useable whether for residential or commercial use. Gibraltar has a shortage of habitable property but a fair amount of unused dwellings. The budget did offer up to £5,000 tax credit to owners of buildings who spent such sum improving the facade of the building. This appears to be a continuation of the existing facade relief which was restricted to properties in the Old Town. I have yet to see the detail and the rules behind this new relief, but any such incentive to encourage property owners to improve their properties has to be welcome.

The budget offered start-up companies a 50% rates reduction in their first year, which is encouraging to entrepreneurs. In addition, all occupants of commercial property can now earn a 10% discount on rates (up from 5%) if they pay on time. Furthermore, to offset the impact of the smoking ban in public places from 1stOctober, bars and restaurants will benefit from a 40% reduction in rates in the first year of the ban and 30% in year 2 (if they, too, pay on time). Occupants of all properties will also be pleased with the freezing of electricity and water costs (as promised in the government’s manifesto) for another year and the abolition of salt water rates.

Main Street retailers who have wanted a reduction in their business costs were perhaps hoping for some further rates relief but instead benefit from a cut in import duty on many Main Street goods. Whether these cuts feed through to the consumer remains to be seen. The Spanish VAT hike to 21% from 18%, effective from 1 August 2012) will further assist the price differentials with our neighbours.

The well publicised reduction in the government’s expenditure on capital projects has already impacted those in the construction sector, and there was little in the budget on when the next office block or hotel might be built. As the supply reduces, so commercial property prices are likely to increase.

Post budget, it’s business as usual in the property sector, with residential lettings robust, residential sales holding up and the commercial property space full of interesting deals. We at Chesterton are very busy with investors who remain bullish about the property sector. And with the new supply of very high end residential property coming on stream imminently, the stability granted from this year’s budget is most welcome.