The Property Market 2003

The property market as we all know has been rising steadily for several years since the low point in the cycle in the early 1990s. In 2003 we fint^ our property market at a very high altitude where the lack of oxygen it seems is causing some crazy things to happen which is not entirely unexpected given the economic conditions.

The star sector of the market to day is obviously the residential sec tor and every property owner is aware of how much their home is now worth by looking at the pages of advertisements in the local pa per, and also the prime retail mar ket, where record rents are being paid and huge premiums to secure prime positions on Main Street.

Free markets are all about de mand and supply, so the situation can be easily summarised as being one of high demand and limited supply. But there is a little more to it than that. In Gibraltar there is al ways going to be a limited supply whatever the demand happens to be. We also have a two-tier market with a clear split between indig enous local demand and interest from outside. Both the residential and the prime retail markets are two tier markets and the demand from the latter pushes the prices and rents up into the stratosphere fuelled by among other things, the easily available and cheap bor rowed finance which is also tax ef ficient.

Mavbe that reason is not so ap plicable to the retail market as it is to the residential, and there are other reasons for the high premi ums being paid for prime retail positions and record rents, but the implications on the local sector of the market are the same — prop erty simply becomes too expensive.

Today estate agents are selling properties in a matter of days,e\'en before the photograph appears in the window and details prepared. A flat in one of the shared owner ship projects has just been agreed at a price that notso long ago vs ould have been achieved at Queensway Quay.

Are we heading once again into a local housing shortage? Quite possibly when prices of starter homes necessitate higher and higher multiples of salary in order to obtain finance.

But on the positive side, Gibral tar as a whole is worth considerably more now than it was worth ten years ago in terms of land value.

Today we have developers and speculators proposing new projects, which will raise the qual ity of the available stock of proper ties and continue to make Gibral tar an attractive place to buy luxury homes.

The infrastructure of the town centre has improved significantly

This has undoubtedlv improved the overall 'shopping experience'.

The Westside reclaimed zone is now fully developed and even market for future larger space us ers who will find it difficult to find accommodation. with the pedestrianisation of Main Street and the success of the Casemates Square regeneration.

The office market has always been unpredictable however and rental levels arc very sensitive to demand and supply. The trend for owner occupation continues and allows businesses to invest in their own properties rather than paying rent, which many regard as dead money. This seems to be particu larly true of smaller local busi nesses. The larger international oc cupiers,like banks tend to prefer to rent with gives a little more flexibil ity.

Furoport is nearly full although the conversion of one wing into our new hospital does restrict the office

The town centre has also ben efited from the Goverrunent spon sored assistance in the form of tax breaks to improve facades and shop fronts. This concept now applies to the whole of Gibraltar and the ef fect is positive. Older properties however are still crumbling away because of the unsuitable law con cerning pre war tenancies. This amounts to a private sector spon sorship of social housing and the matter reallv must be addressed befom these older properties can no longer be saved.

In summary therefore, the prop erty market is in very good shape when viewed from the perspective of activity and values.

There are new projects on the way, which will enhance our envi ronment even though most of us will never be able to afford them.

Gibraltar is clearly attractive to outsiders. We must however be careful to ensure that we are not priced out of the market at the bot tom end and this is something for Gov ernment to address. Certainly there will inevitably be a large pent up demand for low cost housing very soon, if there is not one al ready, and there needs to be some form of mechanism to keep these properties within the low cost sec tor of the market, even at times of very high value like today.