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Property
3,000 home property boom targets local families and cross-border workforce
After several years of pent-up demand from a growing workforce and increasingly affluent population, Ray Spencer, in this first of a two-part Gibraltar property report, considers whether current house building levels may risk oversupply
families needing 2-4 bedroom properties “and we saw rents rise in a very short space of time, he notes. “ Whereas a couple of years ago for example, you could rent a 2-bed Kings Wharf apartment for £2,400pm, today it is up to £3,300.”
This year, three large private sector projects will be completed to add 300+ hous- ing units, primarily in rentals as buy-to-let investors look to generate a return, but also in re-sales either from speculators cashing in, or investors keen to move onto other projects. A minimum price uplift of 10% is common; sometimes it is as much as 40%.
the army of over 12,000 workers - half being non-Spanish - who traipse across the border each day, many of whom would much rather live in Gibraltar if the right property at the right price was available,” Nichols observes.
New to the scene are several develop- ments that feature a heavy content of “affordable” hotel-size studio rooms and small 1-bed apartments, upwards of 840 coming on stream in the next 2-3 years.
At The Hub, close to the airport runway, two years’ of work will start this summer on a 15-storey block of 143 studios measuring from 24 m2, each with pull down bed and sharing TV and games rooms and laundry facilities. “Where else can you buy apartments at an average price of £128,000 and then be able to rent them at £650-
Private and public sector projects costing some £750m are set to provide almost 3,000 residential units over the
next three years, amidst the jurisdiction’s second property boom this Century, according to research by Gibraltar International.
Geographically Gibraltar’s housing market is closest to Spain whilst economical- ly it is closest to the UK. Both of those markets have faced ‘boom and bust’ since the Millennium - but Gibraltar has not.
The 20-years old estate agency BMI, estimates there are only around 150-170 properties for sale (before new builds come on stream), compared with 250 usually. “That is a normal level given the size of the market; any more available above that has previously resulted in downward price adjustments.”
There are few properties to rent – “rental prices have risen quite sharply driven by an expanding financial services and e-Gaming sector”, says BMI director Louis Montegriffo. Last year a firm moved to Gibraltar with 35
Financing of Gibraltar’s open-market projects are charac- terised by developers fronting around 20% of the cost (mostly land), off-plan investors with 25- 30% deposits, and banks provid- ing 50% - but only when most planned units have been sold. “That formula ensures projects will be built out, unlike in the UK where deposits are generally 10%, so purchasers are more likely to walk away if the market turns”, suggests Mike Nichols, Chestertons’ local managing director and development consultant.
Investors are typically achieving yields of 5.5-6.25% gross in the core buy-to-let market - but less for £1m+ properties – and costs of ownership and letting fees reduce the yield by about 1%. Capital growth for the last ten years is 2%–5%pa.
“How property prices move over the next few years is completely outside of an investor’s control, with most being local residents having knowledge of Gibraltar’s property market and economy, and only few as pure speculators. I see it as a cycle – if you don’t have investors, you don’t have construc- tion,” Nichols adds.
Some developers prohibit re-sales of off-plan contracts until all units are sold or until building completion, but delays are a feature of many projects. Almost all Gibraltar properties are leasehold and new developments have 125+ year leases with the UK Crown as ultimate owner.
“There is a shortage of homes for sale and a chronic shortage of rental properties for
700 a month?” Nicholls asks. Developer Tylee Properties, wants to attract first time buyers, divorcees, returning students and non-locals who have moved to the Rock for employment - “a stepping stone for young and old who struggle to get on the property ladder and can’t get on the housing
list”.
Eurocity is an £80m development of 366 apartments in three blocks, where building is scheduled to begin this summer; almost four in five of the units are studios (176) or 1-bed- room (112), and 64 being 2-bedroom. All units in the first block were sold pre-launch, and now the second block, a 22-storey tower set to become Gibraltar’s highest, 143 units are being offered at prices from £165,000.
The entire mixed-use project, which also has two floors each of retail and offices, was the brainchild of Russian developer Evgeny Cherepakhov, chairman of local family business Bentley Investments Group, who was encouraged by demand in 2015 for his adjacent West One 11-storey high block of 96 apartments that has just been completed.
“We are seeing a great deal of new build taking the serviced apartment route with very small properties; the smaller they are, the higher sale cost per square metre. The risk with this is the exposure to the speculator’s market that this type of build invariably
Continued overleaf
Without investors, there’s no building: mike nicholls
eurocity set to provide Gibraltar’s highest block
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Gibraltar International
www.gibraltarinternational.com