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The Gibraltar economy


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20/12/2019

Despite the economic uncertainties that Brexit will bring, the forecast for 2019/20 is indeed very positive. Investment in Gibraltar is regulated by the Gibraltar Financial Services Commission.It is a self regulated jurisdiction conforming to British Law and therefore is able to reinvent itself to withstand adverse global markets and economic conditions.

Government revenue for the 2019/20 budget is forecast at £697 million, superseding the total estimated expenditure which stands at £676million. This represents 14 years of consistent growth with the exception of 2017/18 which slightly dipped but quickly picked up again in 2018/19.

Gibraltar Property Market

Benefits of purchasing property in Gibraltar

  • No VAT
  • No Capital Gains Tax
  • No Inheritance Tax
  • No Wealth Tax
  • Low Corporation Tax: 10% maximum
  • Low personal income tax

Property outlook for 2019/20 and market update.

After the result of the Brexit referendum in June 2016 and contrary to what was expected Gibraltar witnessed an unprecedented growth in sales.

This has also led to a huge demand in rental properties due to ex-pats and British cross frontier workers who currently reside in Spain choosing to move into Gibraltar due to the uncertainty surrounding the residence status of British nationals living in Spain post Brexit.

Couple this with the limited supply of rental property available and this leads to some very attractive rental yields. In addition the Gibraltar Government incentivised rental property investment by announcing a budget measurewhich was subsequently applied to properties constructed between 1 July 2016 and 1st January 2019. It provides owners with a tax credit equal to the tax payable on the rental profits earned for the first twenty four months, if that period occurs in the first five years after the completion of construction of the property. The tax credit can be offset against the tax payable to extinguish any liability to tax.

There is a huge amount of confidence in the local property market due to several factors.

The fact that it is an English speaking jurisdiction and subject to British Law being a strong one. The fact that land itself is a finite resource limiting the amount of development that can actually be accomplished keeps prices at a certain level, making property a sound investment with prices constantly on the rise.

Off-plan developments and investment opportunities.

The number of off-plan property at the higher end of the property ladder is on the rise. 2019 has seen the completion of Ocean Spa Plaza, Imperial Ocean Plaza, Quay 29 and Midtown phase 1 on the Marinas and central town area. All these developments are price for resale at between £6000 and £7000 per square meter. 

The east side of Gibraltar is also undergoing transformation into a residential area through investment of private developers. Clemence Suites also reaches completion with a high level of finish again at the higher end of the scale. 

2020/21 are also set to see a number of high end developments reach fruition mainly at the higher end, in several areas of Gibraltar. Midtown phase 2 has now received planning permission and Quay 31 has already topped out. Euro city in Gibraltar’s west district has already broken ground, with pools, shops and communal areas set to regenerate the entire district. The upper town will see the completion of Arengos Gardens with its stunning views and 3000 square meters of nature reserve trails and gardens being restored and returned for public use after remaining inaccessible and overgrown for almost 50 years.

The east side with see the Hub complete alongside Forbes, another high end development with all the high end amenities to boot. E1 at the southern end of Devils Tower Road is also set to go up. 

Victoria Quays will be a reclamation project on the west side of the colony, which will bring a mixture of high end development along with mid level and affordable housing. All this whilst within a five minute walk of the Main Street.

Take all this into account and the strength of the property market in Gibraltar along with housing needs and investor confidence is clear to see. Off plan prices historically rise between 15% and 25% from start to completion which is a method in which speculators have repeatedly profited and the forecast is that they will continue to do so.

Rental property as investments traditionally achieve between 5% to 7% yield The price of a rental property in Gibraltar varies depending on area and market tier. Studios at the lower end of the market can achieve £800 per calendar month whilst at the top end can be rented for £1300. 

Similarly 1 beds range from £1350 to £2000 per calendar month tier dependent. This will then rise for 2 beds for between £1800 and £2400.

There is a huge demand for these properties for several distinct reasons.

The government allows attractive tax incentives for High Net Worth Individuals, with some schemes having a pre-condition to rent or buy a high end property.

There is a ‘Category 2’ tax scheme for clients with net worth in excess of £2million which allows payment of their worldwide taxes capped at £29,000 per annum.

In 2018 Gibraltar became the first jurisdiction to regulate crypto currency. This has encouraged a surge of crypto currency set ups within t territory bringing an influx of high value employees.

These factors ensure that there is always plenty of demand for rental accommodation.In conjunction with the incentives for buy to let investors already made legislation by the Government and it’s easy to see why Gibraltar property is such a safe, profitable market for property investors.

External links

http://www.mulberry-realestate.com/

https://arengosgardens.com/

https://www.gibraltar.gov.gi/treasury-department/interactive-budget-2019-2020/

https://en.wikipedia.org/wiki/Economy_of_Gibraltar

https://www.numbeo.com/property-investment/country_result.jsp?country=Gibraltar