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Spotlight Gibraltar Residential Market 2016

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Spotlight Gibraltar Residential Market

After several years of strong growth, Gibraltar still offers value on a global stage summary

ibraltar is among Offering favourable tax regimes, an elite and small they are attractive to business club of territories and high-net-worth individuals within with (HNWIs). Prices in these territories Remote , financial services, special and unique appreciated at a time when other tourism and marine services together Ggovernance, and tax national markets in neighbouring status. A self-governing territory with have been languishing. account for 70% of Gibraltar’s GDP a population of 32,000, bordering See page 04 a much larger neighbour, it draws Comparisons with only go parallels with Monaco. Hybrid so far. Gibraltar has its own unique centres of business and leisure and characteristics, history, culture, and located in the Mediterranean, both has developed on its own path. have the characteristics of ‘city’ A modern, compliant, British and ‘resort’. Each has developed an jurisdiction, Gibraltar offers community Gibraltar’s prime property offers value international professional services and safety that makes it an appealing sector and are centres of commerce place in which to live. Emerging later compared to rival jurisdictions. The in their own right. on the global stage, Gibraltar’s prime territory tops our Sunshine/Spend Index property market still offers value when compared to rival jurisdictions. See page 06 This is illustrated in our ‘Sunshine/ Spend’ index on p06. Diversification in Gibraltar’s economy has supported economic growth, generating wealth in the local economy and spurred a wave of new development. Entirely new Prime prices appreciated 15% from 2013 market tiers have opened up to attract to 2015, demand driven by Gibraltarian, the global wealthy. UK and other international buyers

The hybrid nature of Gibraltar as See page 08 a conurbation, destination and recreation location diversifies risk while maximising the market for property. This comes at a time when the prime markets of many world cities are at a high plateau. As Monaco pricing rivals New, off-plan developments sold strongly Hong Kong, becoming the preserve in 2014 and 2015. A number of super- of only the super-rich, Gibraltar prime developments are in the pipeline has the potential to fill a gap in the Mediterranean for HNWIs, at various See page 09 levels. While it may not yet have the cachet of Monaco, proposed new developments, the right investment and infrastructure could propel Gibraltar  A British Overseas Territory in the Mediterranean, Gibraltar is home to a mixture of cultural influences onto the circuit of the global wealthy. n External risks persist around the outcome of the UK EU referendum and wider Notes about the publication This document was published in January 2016. The data used in “Entirely new market tiers have opened up changes to global tax regimes the charts and tables is the latest available at the time of going to attract the global wealthy” See page 10 to press. Sources are included for all the charts.

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Figure 1 importance. Today, this position brings FIGURE 2 GIBRALTAR AT Gibraltar fact file commercial advantages. The Four pillars of the economy A GLANCe of Gibraltar is the most important in Together contribute 70% of Gibraltar’s GDP the Mediterranean for ‘bunkering’, A British Overseas Territory, Gibraltar is the refuelling and supplying of ships, Self governed self governed, self financed and A British Overseas Territory located have full British citizenship. in turn making petroleum Gibraltar’s at the southern tip of the Iberian largest physical export. A major cruise Peninsula only 14km from , ship destination, some 228 vessels Gibraltar is within the and the Remote Financial Tourism Marine Gibraltar is home to 32,000 people. Open for are expected in 2016 with a total of Single European Market for Services, granting it Self-governed, it controls almost all business 342,000 passengers, a 16% increase gambling services INDUSTRY Services its own affairs, taxation and policies. access to a market of 500 million people. over 2015. 20% 20% 20% 10% Some powers, such as defence and foreign relations, remain the Gibraltar levies no VAT, CGT, IHT, wealth tax Gibraltar International Airport puts responsibility of the UK. A member Low tax or tax on investment income, such as interest major UK cities within direct reach, of the European Union since 1973, or dividends from quoted companies. including services to ’s Gibraltar benefits from direct Heathrow, and also offers flights to access to the huge EEA market Moroccan destinations. One of the FIGURE 3 of more than 500m people, but is Sterling The Gibraltar is fixed to the GBP and world’s most iconic airports, its runway Job growth selected sectors exempt from the harmonisation of extends into the sea and is intersected denominated used interchangeably with the British pound. — Gambling and Betting — Financial Intermediation - - - Public Administration and Defence taxes, notably VAT. by the main road between Gibraltar and the mainland, a memorable 3,500 Gibraltar has transformed itself in 82% of the population are Gibraltarian. EU, entry point for those arriving by Culturally the last four decades from Ministry EEA and Swiss citizens have the right to live both land and air. Malaga airport, a 3,000 diverse of Defence outpost to a diversified, and work in Gibraltar. few hours’ drive away, offers direct international service based economy. flights to global destinations including 2,500 GDP has been growing at 10% per , , and annum, in nominal terms, since 2010. Rock of 426m high, the is home to New York. 2,000 Economic growth never dipped below Gibraltar a nature reserve and 300 Barbary macaques. 5% in recent times, even at the depths Gibraltar’s location on the 1,500

of the global recession. This puts its southernmost tip of the Iberian Number of jobs growth rate among the highest of the Source: Savills World Research Peninsula grants it direct road access 1,000 OECD countries. Growth has been to mainland Europe. Several of ’s supported by four pillars of industry: most popular enclaves are within 500 remote gambling, financial services, The number of jobs in Gibraltar’s tax rates, agile regulation and driving distance of Gibraltar, including tourism and marine services. Together remote gambling sector increased favourable infrastructure. NatWest, Sotogrande, Marbella, and 0 they account for 70% of Gibraltar’s from just 542 in 2002, to a high of SG Hambros, Jyske Bank and Malaga, Spanish national parks and GDP (Figure 2). Public debt is low, 3,276 in 2014, making it a larger Lombard Odier all have local offices. numerous golf courses. Many of those 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 and falling, standing at 22.8% of GDP employer than the financial services with homes in Gibraltar also have in 2015, while a budget surplus was sector, which recorded 2,051 in 2014 Gibraltar is an important centre of second homes in Spain. n Source: Gibraltar Statistics Office recorded in the 2014/15 financial year. (see Figure 3). Ladbrokes, William Hill, employment across the broader Gala Coral, Bwin.Party and BetVictor region. Some 9,400 ‘frontier workers’  The Westside is Gibraltar’s commercial hub built on reclaimed land. For centuries the Ministry of Defence all run their online operations from the commute across the border to and military base had been the main territory, taking advantage of Gibraltar’s work in Gibraltar each day. Many source of employment for Gibraltar, legislative environment and favourable take advantage of the lower cost of but today are a very small component tax regime. Recognised as a well property in Spain. of the economy. MOD operations regulated centre of excellence in the now account for less than 600 jobs, a gaming sector, local expertise and The development of local talent is decline offset by the growth of higher established infrastructure continue to supported by a quality value employment sectors. This, support expansion. The sector showed system. Loreto Convent, a private in turn, has transformed Gibraltar’s resilience when the UK introduced a school, will be joined by Prior Park prime residential markets (see p08). point of consumption tax for UK online Gibraltar, a sister school to Prior Park Employment grew 16.4% between gamblers and has remained committed Bath when it opens in September October 2010 and October 2014, to the territory. 2016. All schools follow the UK reaching a record high of 24,422. curriculum and the tuition fees of local Gibraltar is a compliant British, students attending in the UK EU financial services centre, are paid by the Gibraltar government. specialising in insurance, private Gibraltar’s own university opened in clients and asset management. 2015, offering University of London “Gibraltar has transformed Around 20% of UK motor insurance affiliated business degrees, among is underwritten in Gibraltar. It ranks other courses. itself in the last four decades 56th in the world in the latest Global Financial Centres Index, above Connectivity into a diversified, international competing centres that include Gibraltar’s strategic position at service based economy” the , and the gateway to the Mediterranean Monaco. Gibraltar offers competitive historically made it of huge military

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 Gibraltar offers certain tax advantages for wealthy individuals GIBRALTAR AS FIGURE 5 The prime districts of Gibraltar Prime property is found throughout Gibraltar, but concentrated in newer, waterside developments. A DESTINATION Historic property is located in the Town Area, while villas are found almost exclusively in the South FOR HNWI District. The Eastside, meanwhile, is emerging as Gibraltar’s next prime .

For those seeking a home, Ocean Village MARKET KEY Gibraltar’s living environment has much to offer. Safe and secure with Mixed use marina resort with Average price per square metre, Border very low crime rates, the rule of law , restaurants, offices, a prime apartment developments and apartments. is supported by a legal system that ■ £3,000 to £4,000psm follows the British model. Gibraltar ■ £4,000 to £5,000psm is a close-knit community with ■ £5,000psm + a diverse range of nationalities, Airport ethnicities and religious beliefs.

Gibraltar offers certain tax advantages for those wealthy individuals who make it their Town Area primary home. The territory levies no inheritance tax, wealth tax or The historic heart of capital gains tax. ‘Category 2’ status Gibraltar, home to shops, offers HNWI with at least £2m in net restaurants and bars. Apartments Westside in refurbished buildings. assets a maximum annual tax liability of £29,800. For those in receipt of Gibraltar’s commercial hub built on investment or retirement income reclaimed land. Complemented by ‘Self Sufficiency’ status is an option. modern residential developments. A flat 2.5% rate applies to those drawing down that have been transferred from the UK, Upper rock all other distributions from pensions nature are tax free. reserve

For those choosing Gibraltar for FIGURE 4 Eastside business, the ‘Higher Executive Sunshine/Spend Index Possessing Specialised Skills’ CABLE CAR Easy access to Gibraltar’s , (HEPSS) is a tax status for senior has a village feel. Queensway Ambitious proposals exist for executives earning more than PRIME RESIDENTIAL WEATHER residential, luxury retail and a £120,000, whereby tax is only Apartments with marina views. super yacht marina. Direct access to the old town and COMBINED charged on the first £120,000 of quiet surroundings. Harbour LESS EXPENSIVE MORE EXPENSIVE RANKING CLOUDIER/WETTER SUNNIER/DRIER their income.

1 Gibraltar The global market for HNWI is a Summit 426m competitive one and rival jurisdictions 2 Bahamas across the globe offer comparable 3 Cayman systems. One of Gibraltar’s particular advantages is its low-cost prime 4 British Virgin Islands property and sunny, relatively 5 Bermuda dry . 6 We have combined the price of South District 7 prime property with average annual Properties here offer views of the Residential area covering the 8 Monaco sunshine hours and precipitation Strait and the coastline of Africa. southern part of Gibraltar. Home to Continental Europe’s southernmost 9 Isle of Man levels in Gibraltar and 13 competitor a mixture of properties, Gibraltar’s can be found here, a gift and world city locations to create our most expensive stand-alone villas to Gibraltar from King Fahd of 10 Sunshine/Spend Index (Figure 4). By can also be found here. Saudi Arabia. 11 this measure, Gibraltar offers the best- priced prime property with the sunniest 12 Singapore and driest climate. It ranks ahead of 13 London key Caribbean destinations, where 14 Hong Kong climate is comparable but property a third more expensive, and the British Composite of annual sunshine hours, annual precipitation and capital values of Guernsey, of prime apartments and houses suited to foreign buyers Jersey and the Isle of Man, where Source: Savills World Research property is up to double the cost. n Source: Savills World Research

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Residential development and these areas are now profile is diverse when compared to Gibraltar has not seen the yield off-plan in 2015, double that of 2014. of Gibraltar’s historic former police home to 42% of Gibraltar’s population. the national population, of whom 82% compression experienced in many The bulk of sales are accounted for barracks, dating from the 19th markets The majority of properties in Gibraltar are Gibraltarian. major world centres and yields are by four schemes: Midtown, Quay 29, century. Located in the Old Town, are apartments. Villas, in limited supply, relatively high, at between 5% and 6% West One and Ocean Spa Plaza. it is an area identified by the carry a price premium. Gibraltar is foremost a place to for prime property, and 6% and 7.5% government for regeneration. Gibraltar’s residential market relocate to, not a second home for mainstream property. This reflects Part of larger, mixed-use developments has been transformed in the last The expansion of high-paying market. Some 79% of prime market strong rental demand, and from an they offer amenities such as swimming New developments have proved four decades as the economy industry in Gibraltar, coupled with its is for main residences, while there investor perspective, a risk premium pools, fitness centres and on site retail. popular with the investor market, has shifted from defence and development as a centre of wealth has is also an active investment market, over future economic development. Midtown, for example, has a large taking advantage of Gibraltar’s associated activities, to higher-value fuelled demand for prime property. accounting for 20% of sales. office component. West One, targeted strong private rented sector and professional services. In line with New developments have catered to the Investors favour smaller apartments, New development at the mainstream owner occupier yield profile. Around 220 units are this, home ownership has grown owner occupier and investor markets, the average size being 81sqm Gibraltar is experiencing a wave of new and investor market with prices from expected to be launched off plan in rapidly. In 1971 just 3% of housing and a new market for super-prime with an average price of £436,000, development, following several years £150,000, sold out in just three days. 2016. With the exception of Quay 31 stock was owner occupied; by 2012 property has emerged in recent years. compared to 120sqm and £604,000 of very limited new supply. Sales at (120 units at Kings Wharf), launches (the time of the last census) this for owner occupied apartments (for recent launches have been very strong Other recent off-plan launches have will be characterised by smaller had risen to 35%. This is still low by Gibraltar’s prime markets are the prime properties only). and around 375 units were sold included The Arches, a conversion schemes. international standards. In the UK it dominated by two nationalities: stands at 64%, suggesting further those from the UK, and those from Prime apartment prices in Gibraltar room for growth. Gibraltar, who have accounted for rose by 15% between 2013 and 2015, psm % % % SQM 39% and 34% of buyers in the last and evidence in the resale market £5,100 82 78 79 81 Just 6.7km in area and with a three years, respectively (Figure 6). suggest prices stand around 30% Average price of Of purchasers Of prime properties Of prime buyers The average size population of 32,000, Gibraltar has The remaining 26% come from across above 2009 levels. Price growth has prime properties are cash benefit from a purchase their of a prime had to be highly innovative in making the EU and the rest of the world, and been driven by economic expansion, in 2015 buyers communal pool main residence investment property use of its available space. Large tracts include Swiss, , Russians occupier demand and reflects the of land have been reclaimed for new and Australians. The prime purchaser rapid growth of prime product in the new build sector. This is in stark  Gibraltar is foremost a place to relocate to contrast to neighbouring Spain, FIGURE 6 where prices still remain 28% below Population profile and prime residential buyers Office property their Q1 2008 high. n Gibraltarian n UK and other British n Spanish n Other EU n Rest of the world % As an international centre of business with a range In spite of recent price growth, of professional services firms, there is demand for Gibraltar population Prime residential buyers (2013-15) Gibraltar’s prime markets are still 11 quality office space in Gibraltar. A dearth of new developing, and price differentials with 2% 2% 2% office development in recent years has seen some competing territories grant it some Average price Town Area buildings converted from residential to competitive edge. Super prime prices commercial use. 16% in Monaco are seven times those of premium for 12% Gibraltar, for example (see Figure 7). 35% property with Economic expansion and new business entrants, 8% coupled with limited supply have led to rising The picture is different for those in 2% a view commercial rents, which now stand at between £215 the mainstream markets on local and £380psm per annum (£20 and £35 per sq ft). 82% incomes where affordability is a Supply will be eased with the delivery of 33,000sqm 39% constraint. Some 9,400 workers live in of Grade A space at World Trade Center Gibraltar and neighbouring Spain and commute to Midtown in the next few years, some of which has work in Gibraltar on a daily basis. The already been pre-let. The former is part of the World government has attempted to tackle Trade Center Association and will offer flexible space Source: Gibraltar Census and Savills World Research this with co-ownership properties, and leases, making it particularly appealing to new which accounted for 10% of all stock entrants to Gibraltar. at the time of the last census in 2012. FIGURE 7 Government rented properties made In spite of recent price pressure, rents still compare Gibraltar vs Monaco super prime up 39% of all properties, catering to favourably to competitors, although the price mid to low income households. There differential is much narrower than that seen in the has since been delivery of several Gibraltar super prime Monaco super prime residential sector. VS thousand additional properties into the co-ownership sector, with more in the £10,000psm £68,000psm Grade A office rent Psm Per sq ft pipeline in the coming years. comparison per annum per annum London (West End) £871 £81 Rental market Monaco £818 £76 Gibraltar has a strong rental Guernsey £431 £40 market. Across the whole market Jersey £388 £36 some 15% of stock is privately Gibraltar £323 £30 rented. This figure rises to around a Isle of Man £237 £22 third on newer prime developments. There is strong demand in the £800 £215 £20 to £1,500 per calendar month range Source: Savills World Research Source: Savills World Research from relocating executives.

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Emerging super-prime Bluewater, a 38 hectare development This large project, approved by the Stand-alone villas command a on Gibraltar’s Eastside is of sufficient Government, illustrates the ambition World Research Publications significant price premium, given space scale to transform Gibraltar’s profile to establish Gibraltar as a premier restrictions in the territory and are among HNWIs in the region. Built on destination for wealthy individuals, and n Spotlight | Monaco Residential Market found exclusively in the South District. reclaimed land, it will include 1,450 competing directly with rivals along n Spotlight | Residential Market Houses already command a 21% homes, luxury retail, a five-star hotel, the Mediterranean as a yachting n Spotlight | Alpine Property Market premium over apartments on a price and importantly, a super yacht marina. and leisure hotspot. n n World Residential Markets 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 Outlook an entirely new segment for Gibraltar ■ Continued improvement in economic conditions in the UK and Spain, Gibraltar’s major trading catering to the global super rich. partners, will further bolster growth. A diversified economy and professional expertise across a variety of sectors will help sustain Gibraltar as business destination in its own right. Future schemes catering to this sector include Buena Vista Park Villas, the ■ In common with other jurisdictions, Gibraltar faces external risks. To date, the finance, insurance Caleta Apartments and Douglas Point, and online gaming sectors have shown resilience as a low tax jurisdiction within the EU, in the face both on the Eastside. These super- of changes to regulatory regimes outside of Gibraltar. Following the introduction of the UK’s point prime schemes make use of Gibraltar’s of consumption tax Gibraltar lost some of its competitive advantage in the gaming sector. In spite For more publications, visit savills.com/research steep topography to offer dramatic of this, online gaming has remained committed to the territory, citing the benefits of established Follow us on Twitter @Savills views over the Mediterranean, infrastructure coupled with local skills and expertise in the sector. introducing more product to cater to the international elite. ■ Some uncertainty exists around the UK EU referendum and the impact it would have on Gibraltar’s economy and position with EU partners. The Gibraltar government is lobbying for special status in the EU in the event of UK exit, but in the near term this remains an unknown in 21% the market, as it does for the UK. Premium houses ■ New developments targeting HNWI have the potential to attract a new wave of wealth to the command over Rock. The territory may look at the development of Monaco as it grapples with similar issues of restricted land supply and the current demands of super rich, while retaining its own special sense apartments on a price of community and diversity. per sq basis

Savills team World Research

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