Strong economic growth in Gibraltar's financial sector since the 1990s has transformed the property market into one which can cater for high-end buyers, say Montegriffo (Image: BMI Group)
Show Hide image

Special Feature

Gibraltar’s property market: too good to be true?

Louis Montegriffo, director of one of Gibraltar’s oldest property companies, unpacks the facts behind the Rock’s remarkable rise from a one to three-tiered market driven by owner-occupiers

My brief in a nutshell is to describe Gibraltar’s property market over the past decade or so. Below is a chart which helps to tell that story in graphic form. As you can see, it certainly paints a pretty picture. When viewed against the fairly disastrous backdrop of western economies (and their respective property markets – save for London) over the past six or seven years, Gibraltar appears to be a great success story.

But does it all look a bit “too good to be true”? In order to make that judgement, it’s only fair that the reader be presented with some of the facts, so stick will me a little more.

CLICK TO VIEW GRAPH

Gibraltar is a British Territory and not a colony, as popularly believed, and is self-governed.  We enjoy a stable, democratic, multicultural, low-crime environment – but that’s not all. Economically, the Rock is strong. In his budget speech this June the Chief Minister announced GDP growth was estimated at 10.2 per cent for the tax year 2013/14, that gross public debt stands at 32 per cent of GDP, with net public debt at 25 per cent of GDP, and that the budget surplus for 2013/2014 is estimated to be a record £65m, 4.6 per cent of GDP. Furthermore, it was announced that Gibraltar ranked in the top 20 globally for GDP growth and placed in the top 10 ranking of GDP per capita.  

I won’t bore you with any more detail on stats, budgets and charts but will say this: the dotted blue line on our graphic (above) shows the GDP trend up to 2013. While it cannot perhaps be said to have a direct bearing on property sales figures, it certainly underpins a record of increasing strength in our economy.

So how did this all come about? Gibraltar’s property market really began to take shape back in the mid to late 90s (it is interesting to note that prior to 1990 only 5 per cent of Gibraltarians owned their own home). Through a targeted effort by local government in providing low-cost properties to locals during this period, owner-occupier figures soon rose to over 35 per cent and began what we know as the market today.

It’s important that we remember that back in the 1990s, our market was principally driven by a one-tier sector (the low tier). At this time, rates per square meter averaged around £850/sqm (compare this with boroughs in London today where property can sell for over £10,000/sqm) and the majority of our buyers were invariably all of local origin or with some organic connection to Gib.

It was the advent of a growing financial centre on the Rock during the late 1990s that created a new platform in our property market which swiftly developed into a three-tier market (low – mid – high); one which could cater for all sectors, albeit still at prices which by comparison to competitor jurisdictions - such Jersey, Guernsey, Monaco, and Switzerland - were (and remain) low. As was the case with most western economies, the property trend between 2000 and 2007 was bullish, and in our case was steered primarily by a burgeoning economy in which the financial sector, online gaming and port related activity formed the major thrust of growth. The graphic above clearly shows how both “average house price” stats rose, with the green line excluding the top 10 per cent high value sales.

You will be forgiven for assuming that in Gibraltar we too suffered from that fateful calamity which is now known as the “credit crunch”; or as George W. Bush so finely put it: “Wall Street got drunk and now it’s got a hangover”. Property prices did see a dip over a 24 month period, but not because of an economy in decline; rather an overheated speculative market with a little too much stock. In other words, that peak that you see in 2007 was driven purely by speculative investors.

The following 24 months were not easy, and like other property markets around the world we were heavy in stock and light on buyers. However, unlike other markets, it took Gibraltar all of just two years to turn it around.

The Queensway Quay development in Gibraltar (Image: BMI)

Clearly our strong economy (that blue dotted line) has been the overriding factor in the recovery of the market over the past four years. The current climate continues to be positive and is likely to improve further. For three years (since 2011) we have witnessed the market harden up and prices slowly improve; 2013 underpinned this further with a marked increase in “high value” sales. Demand has continued in line with the growth in the economy and we have seen property prices (particularly in the high value market) over the past three years increase by up to 40 per cent in some areas, but averaging out at around 20 per cent.

Key to all of this is the fact that unlike our last property boom in 2007, which was speculatively led, today’s prices are geared by an owner-occupier market. That is to say, those who drive Gibraltar’s property market currently are existing users working and residing in Gibraltar, as opposed to speculators which, in buoyant environment with over-development, will tend to overheat the market with sometimes dangerous consequences. The fact that the property sector is steered by owner-occupiers also suggests that the market is strong and stable with real demand outstripping speculative demand – this says a great deal about the strength of the economy and the attraction of living and working in Gibraltar: English-speaking, great schooling, low crime, sunshine, well-regulated finance centre, stable economy, multi-cultural society……need I say more?   

Of particular interest is the high value sector which over the past two years has matured markedly. In fact, it has matured to an extent that we are potentially seeing a four tier market: low, mid, high and a new high with an increase in £1m-plus property sales. This is one area to keep a watchful eye on, as we are beginning to see interest from new high value players who years ago would just not have considered the Rock. This, in my view, says a great deal about the future.

So after weathering the financial downturn, as always will remain cautiously optimistic. At BMI Group, the Gibraltar real estate company which I direct, our sales volume has been on the rise since 2011. Last year kicked off as the best year we have had since 2007, with 2014 already shaping up too with similar forecasts. So, is Gibraltar’s property market too good to be true? Well, I like to think not, but it’s your call.

Louis C. Montegriffo is Managing Director of BMI Group              

 

Photo: Getty
Show Hide image

Promoted

Looking to the future

In our last regular article on Gibraltar for a while, Gibraltar Chronicle editor Brian Reyes looks to the economic and political outlook for the short and medium term.

At the beginning of March, over 150 members of the local business community gathered in the World Trade Center construction site for a ‘topping out’ ceremony. As the last beam was placed on the structure, guests heard speeches about Gibraltar’s resilient economy, its potential for international growth and the need to offer global businesses the necessary working environment to remain competitive.

The EU referendum and the prospect of a so-called Brexit are dominating the headlines, and much of the coverage is gloomy. But in the background, Gibraltar’s private sector continues to drive projects which, in the long term, will help attract international investors to the Rock.

Earlier that same day, Gibraltar’s Development and Planning Commission heard submissions from well-known British architect Jonathan Manser, who leads the design team behind Eurocity, another major development that has its eye on Gibraltar and a prosperous future.

There are other schemes too, some still on the drawing board, some already under way. The MidTown Development, a mix of offices and top-end flats, is funded by a local consortium on a prime site in the heart of town. On the east of the Rock, the ambitious Bluewater project promises a mix of luxury and affordable homes alongside a marina. There are plans too for a former Ministry of Defence site named after Admiral Rooke, while in the Old Town, developers and individual home owners are breathing life into this run down but charming warren of steep, narrow alleyways.

Elsewhere, work is progressing on key infrastructure that will be essential for Gibraltar’s future, in or out of the EU.

Experts are finalising the environmental impact assessment for a facility that will store liquefied natural gas for Gibraltar’s new power station, already under construction. Work should resume too on the airport tunnel project, vital to freeing up Gibraltar’s clogged roads. A new sewage treatment plant, although still some way off, is also in the pipeline, a critical and long-overdue element of Gibraltar’s infrastructure.

There are new attractions for tourists - the opening of the Upper Rock rope bridge and sky platform is eagerly awaited by locals too - and important developments in culture and education, where the University of Gibraltar is building strong academic links across the community and beyond.

And against the background of uncertainty over the UK’s - and by extension Gibraltar’s - membership of the EU, the Gibraltar Government is leaving nothing to chance. A team of economists is analysing the different possible permutations of membership of the EU, EFTA or the EEA, including the potential effects on the Rock’s export economy of membership of the Common Customs Union. 

Despite the combative nature of Gibraltarian politics, there is unity on this question. Both the Gibraltar Government of Gibraltar and the Opposition agree that the UK and Gibraltar should remain in the EU and that Brexit could undermine the Rock’s economic model, creating uncertainty that Spain will undoubtedly seek to exploit. They add that the UK must factor Gibraltar into any post-Brexit negotiation with the EU.

Gibraltar’s long-term economic future will also be placed under scrutiny locally this year by the 2025 Committee, which brings together the public and private sectors and unions to draw up 10-year strategies for the different sectors of the economy, identifying challenges and opportunities in areas as diverse as e-gaming and shipping. A key element of this will be to find new opportunities for business in emerging markets in Asia, the Americas, the Middle East and Africa.

In parallel, a cross-party select committee of the Gibraltar Parliament will analyse various aspects of the 2006 Constitution ahead of a constitutional conference with the United Kingdom on a date yet to be determined. Along with the UK’s referendum on EU membership, the constitutional review will dominate much of parliamentary and political activity during 2016 and likely into 2017. If any changes are proposed as a result of the review, they will first have to be put to a referendum before they can be adopted.

Gibraltar is keeping a wary eye too on Spain, which has yet to swear in a government following an inconclusive general election last December. The future of cross-border relations will depend not just on whether the UK remains within the EU, but on the outcome of the post-election wrangling in Spain.

But even as Spanish politicians try to hammer out a coalition pact in a bid to avoid a return to the polls in June, there is grassroots contact across the border.

The Cross Frontier Group, which brings together business and union interests from Gibraltar and the Campo de Gibraltar, is forging ahead with a proposal to access EU funding for cross-border initiatives. Separately, the government continues to maintain contact with Spanish politicians ranging from PSOE senators to the mayor of La Linea, Juan Franco.

The hope is that, having cleared the EU referendum hurdle, Gibraltar will be able to develop positive dialogue with Spain, irrespective of who is in government. There is much to be gained through practical cooperation in areas as diverse as commerce, culture and sport.

There is, inevitably, a degree of caution. Spain’s acting Foreign Minister, José Manuel García-Margallo, has signalled that if Britain left the EU - and if his party remained in power - he would seek to revive the joint sovereignty proposal robustly rejected by Gibraltar in 2002. 

It would be a move doomed to failure because Gibraltar will have nothing to do with such a a proposal, and neither will the UK. Their shared view is that nothing can be decided on Gibraltar’s future without the agreement of the Gibraltarians.

When he was sworn in as Gibraltar’s new Governor last January, Lieutenant General Edward Davis reaffirmed the UK’s double-lock commitment to the people of Gibraltar, underscoring their inalienable right to self-determination and the UK’s commitment to secure their consent in all matters that pertain to the sovereignty of Gibraltar.  

In doing so, he was reflecting the words of one of his predecessors, General Sir William Jackson.

“Gibraltar is neither Spain’s to claim nor Britain’s to give,” Sir William wrote, in a sentence that resonates to this day and sums up the situation succinctly.

“It is the rock of the Gibraltarians.”

This will be the last item on the New Statesman’s Gibraltar hub for at least a while. We’ve thoroughly enjoyed bringing you insights and hopefully greater understanding of the issues affecting the Rock as well as its politics, culture, geology and a great deal else. We would like to thank our sponsors the Gibraltar government, our many writers and above all our readers.

Charlotte Simmonds, editor, March 2014-March 2015

Guy Clapperton, editor March 2015-March 2016

Brian Reyes is the editor of the Gibraltar Chronicle.