by Mike Nicholls
Yesterday’s announcement was another surprise in the world of politics. So what will be the impact on the Gibraltar property market?
Since the referendum, the Gibraltar property market has been remarkably resilient. Within a week of last year’s shock vote, there was a surge in rental demand and within a few weeks, property sales continued apace, as though Brexit hadn’t happened. Meanwhile, such is the interest in Gibraltar, that in the 300 days since the referendum, the number of users on the Chestertons Gibraltar website has increased by 41% compared to the 300 days preceding the referendum. Not only that, but users from 153 countries in the world have accessed the Chestertons’ website post referendum.
But why the confidence, when there is so much uncertainty?
We believe that there are three main factors behind the Gibraltar property market’s resilience.
Demand and supply
Simply put, there are 12,000 Spain based employees of Gibraltar companies crossing the border each day to work. Say 10%, or even 20% would move to Gibraltar if a suitable property at the right price existed. That’s 1,200 – 2,400 properties potentially required when there are just 200 open market properties available on the market today to buy or rent. Add to that the interest from around the EU as predominantly British expats, seek a more friendly environment as their main residence.
By international comparison with other low tax jurisdictions, Gibraltar remains cheap. Monaco is nine times more expensive, Hong Kong four times and Switzerland three times. Many investors argue that there remains price growth ahead.
Confidence in Gibraltar’s future
In or out of the single market, Gibraltar will not just survive but will thrive. That’s the sentiment of many business people and politicians who steer Gibraltar PLC. As a small jurisdiction, Gibraltar can react quickly to the rapidly evolving European political and business landscape. Hence Gibraltar will remain attractive to employers and high net worth individuals seeking an attractive location in terms of tax, regulation and lifestyle for their main residence.
So does the snap election change matters?
Uncertainty is the enemy of all markets, not least property markets. Brexit has brought uncertainty, especially for Gibraltar and its unique issues in respect of the Spanish border.
However, Gibraltar has the support of the main UK political parties. For example, earlier this month Theresa May stated: “We are very clear that we support Gibraltar, we’re working with the Government of Gibraltar and will continue to do so. We want to negotiate the best possible deal for the UK and the best possible deal for Gibraltar. We are absolutely steadfast in our support of Gibraltar, its people and its economy. Our position has not changed.”
And reconfirming again the so called ‘double lock’.
“We have been firm in our commitment never to enter arrangements under which the people of Gibraltar would pass under the sovereignty of another state against their wishes, nor to enter into a process of sovereignty negotiations with which Gibraltar is not content.”
Fabian Picardo recently spoke to Jeremy Corbyn and quoted what the leader of the Labour party had to say: “He restated the commitment to British Sovereignty of Gibraltar and the double lock in the respect. I am very happy to be able to report to the people of Gibraltar that Mr Corbyn and the rest of the Labour front bench team do not share any of the views of those in the Labour Party in 2002 who tried to force Gibraltar to share its sovereignty with Spain.”
Whilst the Liberal Democrat Foreign Affairs spokesman Tom Brake recently said, “It is our obligation to support our overseas territories, and any attempt to brush off the importance of Gibraltar would be a dereliction of duty that would leave Margaret Thatcher spinning in her grave.”
Politically, Gibraltar has cross party support.
Should the Conservatives, perhaps Gibraltar’s staunchest ally amongst the main UK parties, increase their majority as predicted, their negotiating hand with the EU becomes stronger. The path to Brexit, not one we voted for last year, but now a virtual inevitability, becomes clearer. There will be less uncertainty due to the greater clarity set out by a newly mandated government in Westminster, oozing in confidence after electoral success.
The markets think so. The strength of a country’s currency is a good indicator of the success of the economy. Sterling’s increase yesterday suggests the international currency markets see the early election and likely Conservative increased majority as positive.
So what of the Gibraltar property market?
Usually ahead of a UK general election, the number of property transactions fall until the outcome is known and then there is a mini surge in activity. This time it is different as the lead time to the election is just seven weeks compared to the usual five or six months. Hence there is less time for any stagnation. So we do not expect a pre-election lull but there may be a post-election boost.
The number of properties for sale on our books currently is relatively low. This may be because would be vendors are adopting a wait and see approach on the impact of Brexit in Gibraltar before making their decision to move. An early election may create greater certainty sooner, which may release more property onto the market, which we would welcome, as the buyers are there, the problem is, the lack of supply.
If May’s gamble pays off, expect further confidence in the Gibraltar property market.
Mike Nicholls is the managing director of Chestertons Gibraltar