▲ Gibraltar is foremost a place to relocate to
Prime prices appreciated 15% from 2013 to 2015, while new, off-plan developments sold strongly in 2014 and 2015
Gibraltar’s residential market has been transformed in the last four decades as the economy has shifted from defence and associated activities, to higher-value professional services. In line with this, home ownership has grown rapidly. In 1971 just 3% of housing stock was owner occupied; by 2012 (the time of the last census) this had risen to 35%. This is still low by international standards. In the UK it stands at 64%, suggesting further room for growth.
Just 6.7km in area and with a population of 32,000, Gibraltar has had to be highly innovative in making use of its available space. Large tracts of land have been reclaimed for new development and these areas are now home to 42% of Gibraltar’s population. The majority of properties in Gibraltar are apartments. Villas, in limited supply, carry a price premium.
The expansion of high-paying industry in Gibraltar, coupled with its development as a centre of wealth has fuelled demand for prime property. New developments have catered to the owner occupier and investor markets, and a new market for super-prime property has emerged in recent years.
Gibraltar’s prime markets are dominated by two nationalities: those from the UK, and those from Gibraltar, who have accounted for 39% and 34% of buyers in the last three years, respectively (Figure 6). The remaining 26% come from across the EU and the rest of the world, and include Swiss, Germans, Russians and Australians. The prime purchaser profile is diverse when compared to the national population, of whom 82% are Gibraltarian.
FIGURE 6Population profile and prime residential buyers
Source: Gibraltar Census and Savills World Research
Gibraltar is foremost a place to relocate to, not a second home market. Some 79% of prime market is for main residences, while there is also an active investment market, accounting for 20% of sales. Investors favour smaller apartments, the average size being 81sqm with an average price of £436,000, compared to 120sqm and £604,000 for owner occupied apartments (for the prime properties only).
Prime apartment prices in Gibraltar rose by 15% between 2013 and 2015, and evidence in the resale market suggest prices stand around 30% above 2009 levels. Price growth has been driven by economic expansion, occupier demand and reflects the rapid growth of prime product in the new build sector. This is in stark contrast to neighbouring Spain, where prices still remain 28% below their Q1 2008 high.
In spite of recent price growth, Gibraltar’s prime markets are still developing, and price differentials with competing territories grant it some competitive edge. Super prime prices in Monaco are seven times those of Gibraltar, for example (see Figure 7).
FIGURE 7Gibraltar vs Monaco super prime
Source: Savills World Research
The picture is different for those in the mainstream markets on local incomes where affordability is a constraint. Some 9,400 workers live in neighbouring Spain and commute to work in Gibraltar on a daily basis. The government has attempted to tackle this with co-ownership properties, which accounted for 10% of all stock at the time of the last census in 2012. Government rented properties made up 39% of all properties, catering to mid to low income households. There has since been delivery of several thousand additional properties into the co-ownership sector, with more in the pipeline in the coming years.
Gibraltar has a strong rental market. Across the whole market some 15% of stock is privately rented. This figure rises to around a third on newer prime developments. There is strong demand in the £800 to £1,500 per calendar month range from relocating executives.
Gibraltar has not seen the yield compression experienced in many major world centres and yields are relatively high, at between 5% and 6% for prime property, and 6% and 7.5% for mainstream property. This reflects strong rental demand, and from an investor perspective, a risk premium over future economic development.
Gibraltar is experiencing a wave of new development, following several years of very limited new supply. Sales at recent launches have been very strong and around 375 units were sold off-plan in 2015, double that of 2014. The bulk of sales are accounted for by four schemes: Midtown, Quay 29, West One and Ocean Spa Plaza.
Part of larger, mixed-use developments they offer amenities such as swimming pools, fitness centres and on site retail. Midtown, for example, has a large office component. West One, targeted at the mainstream owner occupier and investor market with prices from £150,000, sold out in just three days.
Other recent off-plan launches have included The Arches, a conversion of Gibraltar’s historic former police barracks, dating from the 19th century. Located in the Old Town, it is an area identified by the government for regeneration.
New developments have proved popular with the investor market, taking advantage of Gibraltar’s strong private rented sector and yield profile. Around 220 units are expected to be launched off plan in 2016. With the exception of Quay 31 (120 units at Kings Wharf), launches will be characterised by smaller schemes.
Stand-alone villas command a significant price premium, given space restrictions in the territory and are found exclusively in the South District. Houses already command a 21% premium over apartments on a price psm basis and new development is pushing the premium higher still. The Sanctuary, a development of five detached villas and three mews houses priced at up to £10,000psm represents an entirely new segment for Gibraltar catering to the global super rich.
Future schemes catering to this sector include Buena Vista Park Villas, the Caleta Apartments and Douglas Point, both on the Eastside. These superprime schemes make use of Gibraltar’s steep topography to offer dramatic views over the Mediterranean, introducing more product to cater to the international elite.
Bluewater, a 38 hectare development on Gibraltar’s Eastside is of sufficient scale to transform Gibraltar’s profile among HNWIs in the region. Built on reclaimed land, it will include 1,450 homes, luxury retail, a five-star hotel, and importantly, a super yacht marina.
This large project, approved by the Government, illustrates the ambition to establish Gibraltar as a premier destination for wealthy individuals, and competing directly with rivals along the Mediterranean coast as a yachting and leisure hotspot.
As an international centre of business with a range of professional services firms, there is demand for quality office space in Gibraltar. A dearth of new office development in recent years has seen some Town Area buildings converted from residential to commercial use.
Economic expansion and new business entrants, coupled with limited supply have led to rising commercial rents, which now stand at between £215 and £380psm per annum (£20 and £35 per sq ft). Supply will be eased with the delivery of 33,000sqm of Grade A space at World Trade Center Gibraltar and Midtown in the next few years, some of which has already been pre-let. The former is part of the World Trade Center Association and will offer flexible space and leases, making it particularly appealing to new entrants to Gibraltar.
In spite of recent price pressure, rents still compare favourably to competitors, although the price differential is much narrower than that seen in the residential sector.
Source: Savills World Research