The devaluation of Sterling against other major currencies has helped draw overseas investors to Gibraltar's property market this year. The Gibraltar pound is pegged to Sterling, so property prices in Britain's small Mediterranean territory have become 25 per cent cheaper for buyers earning in euros, dollars and currencies pegged to the Greenback, like the Dubai's dirham and Hong Kong dollar, since early 2008.
British estate agency, Beauchamp Estates, has received dozens of enquiries from potential overseas buyers for Admiralty House, a colonial-style, seven-bedroom residence it is marketing, since the start of 2009. On offer for an undisclosed sum, the cliff face, Georgian home boasts a swimming pool and sea views.
“The Gibraltar pound is fixed to the Sterling pound, therefore buying power in dollars or euros is now greater,” says Gary Hersham, director at Beauchamp Estates.
In addition to the devaluation of the Gibraltar pound, a slide in The Rock's property prices has made homes cheaper to buy.
According to Jeremy Boyd, director of estate agency Chesterton Gibraltar, prices have fallen 10 per cent from their peak in late 2007. With a population of only 30,000 and land area of 6.5 square kilometres, statistics on Gibraltar's housing market are scanty.
“There is no institution that monitors price movements, because Gibraltar is too small and monitoring is too expensive for them, so agents must feel their way through the market,” he says, “In consultation with other agents, bank valuers and from our own sales I would say price levels now comparable to early 2007.”
The market for good quality homes valued at £400,000 or more was firmer than for lower priced properties he said, because of strong demand from incoming business executives working in Gibraltar's expanding services industries. Most buyers bought in cash or with a small mortgage he said.
The market for homes valued at £400,000 or more is also helped by steady demand from wealthy individuals moving to Gibraltar to take advantage of low personal taxes estate agents say. Gibraltar runs a scheme called, Category Two, whereby wealthy overseas individuals have taxes on their worldwide income capped at £22,000 each year if they take up residency in the territory. It is very popular with Britons.
According to Hersham, Gibraltar has 330 high net worth foreign residents taking advantage of its Category Two scheme, and receives 40 applications each year from others wanting residency.
Gibraltar has few personal taxes. There is no VAT, wealth tax, inheritance tax, nor capital gains tax, and the maximum level of stamp duty is 2.5 per cent. The standard rate of income tax is 30 per cent, but this is not levied on income from investments. There are no exchange controls.
“Gibraltar competes exceedingly well with all the Caribbean tax havens as well as the Isle of Man,” Hersham says.
Overall, housing demand is underpinned by Gibraltar's rapid GDP growth since the 1990s. It grew at 8 per cent in 2008 and is forecast to expand by 5 per cent in 2009. Its jobs market has grown 45 per cent over the past ten years government figures show.
The government has encouraged economic diversification since the mid-1990s to ease reliance on providing port facilities for the Royal Navy. Developing itself into a shopping centre for the western Mediterranean and tax haven has created new jobs in financial and legal services, retail and, most recently, internet gaming.
Main Street, Gibraltar's biggest shopping thoroughfare, is lined with international outlets like Dorothy Perkins and Marks & Spencer, and local stores selling luxury goods like Rolex.
Shipping, a long-term mainstay of the economy, and tourism account for about 50 per cent of GDP between them.
According to Peter Caruana, Gibraltar's chief minister, the territory would have the 13th highest GDP per capita in the world if it was defined as a sovereign state, because of its rapid growth. In 2005, its GDP per capita was estimated to be $38,200.
Demand for offices and housing in Gibraltar has been given a new boost by the government's decision to set corporation tax at a standard rate of 10 per cent for all companies from July 2010, says Boyd, because it was attracting more overseas businesses to the territory. Existing corporation tax rates range from zero to 27 per cent.
“We just heard at the end of March that William Hill (British gaming company) are relocating 40 executives to Gibraltar, because of the corporation tax cuts,” he says, “Insurance companies are relocating to Gibraltar at the moment - they are building their offices, and the staff will follow later.”
He said Dublin's property prices rose when the Irish government introduced a relatively low 12.5 per cent flat rate of corporation tax in 1998, because it increased business investment, so he expected Gibraltar's property prices to rise for the same reason.
Although tax havens have come in for much criticism from politicians across the world this year, and pressure is growing on some to stop sheltering tax evaders and money launderers, Gibraltar's position remains secure, because it does not have high levels of banking secrecy, he says.
Although Spain objected to Gibraltar setting a standard rate of 10 per cent corporation tax, the territory has received backing for this reform from both Britain and the European Court of Justice in December 2008. Gibraltar is not on the OECD's blacklist of un-cooperative tax havens.
The falling pound has been good news for Gibraltar's landlords, because demand for rental properties in the territory is rising - the strengthening euro has made Spanish rents 30 per cent more expensive than in early 2008 for those earning in pounds, Boyd rays.
Traditionally, expatriates working on The Rock prefer to rent a house with garden in Spain, because these properties are rarely available in high-rise Gibraltar. But times are changing, he says.
“This quarter we are seeing that executives are now thinking whether Spain does offer value for money, because the euro has risen against the pound, so some of these guys are moving back to Gibraltar,” he says.
They are also attracted to improvements in the quality of housing at new developments in Gibraltar he adds.
These include several schemes at Ocean Marina Village. At the Village's 16-storey Imperial Ocean Plaza, prices range from £160,000 for studios to £580,000 for three bedroom apartments. Fairhomes, is building 32 detached villas at prices ranging from £895,000 to £4 million next door.
In the second-hand market, studios are on offer for £80,000 through surveyors, Brian Francis & Associates. Pricier properties marketed by the company include a 140 square meter, three bedroom flat with basement in a Colonial-style building for £450,000 million.
BUYERS GUIDE
The Gibraltar government encourages overseas investment in its property market. As mentioned in the main article above it runs a low tax scheme for wealthy foreigners that requires them to buy a home there.
Under the Category Two scheme, individuals with at least GBP2 million in assets can declare themselves Gibraltar residents for tax purposes. This means they pay a maximum of GBP22,000 on their worldwide income each year. They do not need to be physically resident in the territory, but must buy a home there.
Most applications for the Category Two scheme are approved, because the government is primarily concerned with weeding out money launderers, Gary Hersham, director at estate agency, Beauchamp Estates said.
According to estate agency, Chesterton Gibraltar, void periods for rental properties are usually only a few days each year, because tenant demand is strong and stock limited. Developers promise 5.5 - 6 per cent rental returns at their projects. Mr Hersham said yields can be 7 per cent for properties with direct access to the sea.
Since the Gibraltar pound is pegged to the British pound it means its exchange rate with the Hong Kong dollar is the same. Interest rates in Gibraltar follow those set by the Bank of England which are 0.5 per cent (at time of writing). The British pound can be used in Gibraltar.
Mortgage interest rates are low at the moment. Mortgages for 90 per cent of the value of a property are available from NatWest Bank at an interest rate 2.2 per cent above the Bank of England base rate.
As a British overseas territory, Gibraltar's legal system is based on English law. As in Britain, properties are sold either leasehold or freehold.
English is the official language. Gibraltar is part of the European Union.
(All The World's a Home : Global Property News)
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