Just thought I would post some information concerning Gibraltar.

The local market there is something of an enigma for a number of reasons:

Postitives

• Genuine land shortage
• Lots of relocating staff for gaming/banking/insurance/shipping industries
• Full employment, in fact greater than 100% - 18,485 out of a population of 30,000, with many thousands commuting from Spain everyday
• Gibraltar address required in order to send children to school there or own a Gib-registered vehicle
• Property required in order to qualify for High Net Worth status
• 10% yield on rental properties
• Very low crime levels

Negatives

• Vastly over-priced in relation to average salaries....approx £19K
• Living in Spain a far superior lifestyle
• Crossing the border has become easier
• Rents jaw-droppingly low, 20-30 miles further up the coast in Duquesa, Manilva etc
• Recent budget changes have removed tax incentives for owning properties...new flat rate tax with no allowances
• Much smaller properties compared to Spain

Overall, I think the sweeping changes in the last budget in June, have started the rot in the Gibraltar housing market.

Previously, flats were purchased specifically to offset income tax. Allowances were deducatable against mortgage interest & insurance/endowment premiums. The new system has slashed tax bills for middle to high earners.

Added into the mix, the recent credit crunch, I noticed today in the local paper that, prospective buyers were facing mortgage refusals by local lender Barclays due to affordability issues (now where have we heard that before )

.....On the report that a number of purchasers are experiencing difficulties with their bridging loans Barclays states that it is addressing all applications for facilities, be they bridging facilities or mortgages, with due care and attention to affordability.
“The general public and Regulators would expect this from a responsible lender such as Barclays Bank. Regrettably, as is the case in all borrowing requests, and prospective purchasers of these properties are no exception, a relatively small number will not be able to meet the reasonable and prudent requirements we apply to ensure borrowers can afford what they wish to borrow,” said the bank.
“In the report, it was mentioned that the Government are looking to other lenders to offer facilities. In other words, Barclays Bank is the only Bank currently offering facilities to these prospective purchasers.”.....

http://www.chronicle.gi/readarticle.php?id...tar%20Chronicle

Having made my post last week, I have spent some time investigating the Gibraltar market and I have come to the conclusion, it is a monumental bubble on the Iberian Penisula.

Let's look at Watergardens, a large development in Gibraltar, close to the marina and the town centre.

A 3-bedroom flat is for rent in this complex at £1500 per month

http://www.bfagib.com/rentalsdetail.asp?Property_ID=1937

A similar property in the same complex, is for sale at £315,000.

http://www.bfagib.com/sales/salesdetail.asp?Property_ID=1345

With a 10% deposit, interest only @ 7.25%, the monthly payment would be £1712.81, but you also need to take into consideration both:

• the service charges of £639 every 6 months = £106.50 per month
• lost interest on 10% deposit = £31,500 * 0.05/12 = £131.25

Therefore total monthly cost = £1950.56

The rental yield of this property is 18000/315000 = 5.71%, however the landlord is subsidising the renter to the tune of £450.56 per month

But of course, I haven't included any Capital Appreciation


Let us move approx. 1 mile across the border and look at similar flat in the Spanish town of La Linea.

The following flat, although not having sea views, is of a similar size and located in a safe, central area of the town:

http://www.idealista.com/pagina/inmueble?c...otos&tipo=I

For Sale at €225,000 (£157,343)

Therefore, with a 10% deposit and interest at 6.25%, the monthly payment would be €1054.69

Plus

• No monthly service charge!
• Interest lost on the 10% deposit, €22,500 * 0.04/12 = €75 per month

Total monthly cost = €1129.69/1.43 = £789.99

A similar flat to this could be rented for approx €800 (£559) per month (expensive for Spain, but driven much higher due to re-located workers demand for property close to the Rock).

But even so, the landlord is still subsidising the rent to the tune of €329.69 per month and only achieving a yield of 4.27%

However, comparing the Gib flat to the Spanish flat, shows just how bubbly the Rock is:

£315K v £157K purchase price
£1951 v £790 monthly cost
£1500 v £559 rental value

And the only extras you are getting for living in Gib are:

• Easy commute
• Children can attend the local schools
• Cheaper cars/running costs

Therefore, I can safely declare that Gibraltar is an enormous bubble on the the Iberian Penisula.

(for the purpose of this calculation I have used the following values:)

Exchange Rate:
€1.43 = £1.00

Borrowing Rates:
Spain 6.25% (4.75% ECB)
Gib 7.25% (5.75% BOE)

Saving Rates
Spain 4%
Gib 5%

I dissagree. Reason people pay this is due to the High Networth residency scheme that Gibraltar has. The tax advantages outweigh the higher living cost.

But i do agree, both Spain & Gibraltar have rental yields below cost of finance, this is almost everywhere in europe (except Germany). This is a sign prices are too high.

Only some properties qualify for HNW residency usage, generally "luxury" developments.

I agree this does inflate the prices at the higher end of the market, however, (unfortunately I can't find the figures), but I think there are only a relatively small number of HNWs in Gibraltar.

The main pressure on the rental prices, are company lets for relocated staff, non-Europeans who are not permitted to live in Spain, and those who want to send their children to the local state schools.

Spain is crashing as we speak, the painful 10% purchase costs, which could be swallowed in a rising market, are devastating when prices are falling.

Why pay 10% to buy somewhere that is falling in price, when you can rent a similar property for 50% of what your interests payments would be?

From the Spanish Property Forum........


Returning to topic, received this unsolicited e-mail today - don't know how they got my address but there is an apparent discount of nearly 20%, plus it's fully furnished.
Don't know if bank valuations are notoriously high, low or true to market price as this will affect whether this is truly a 'bargain' or not.

Bargain Apartment Elviria
2bed 2bth apartment, Los Patios de Santa Maria Golf
Next to Santa Maria golf course and clubhouse, 10 minutes walk to
pino commercial, elviria, with restaurants, shops banks and
pharmacy, 15 minutes walk to beach including nikki beach and the
don carlos hotel and beach club.
86m2 built plus 35m2 terrace, complete with parking and storage,
cream marble floors, travatino marble bathrooms,
sold fully furnished, at the low price of 259,999 euros,
previous bank valuation on similar apt in this development was 320,000euros.


http://www.spanishpropertyinsight.com/foru...68&start=45

It was thanks to some Gibraltarian property investors that I found Meditteranean Morocco. They in 2005 advised me 'the smart money is buying in Morocco now, just 7 km away'. 'Smart money' included crime money btw.

Gibralter seemed even then to have already put on its easy gains, and I could'nt find any decent yields.

GIB PROPERTY PRICES SET TO DROP, SAYS REPORT

By Brian Reyes
House prices in Gibraltar are set to drop in the New Year, according to a study by the local branch of international accounting firm Deloitte.

Many of the real estate agents polled by Deloitte for its November property survey said the Gibraltar residential market was cooling down after a relentless climb over recent years.

Back in July respondents expected house prices to stay flat or increase. Three months later, those expectations had shifted unanimously to ‘no change’ in price. That could signal the start of a dip in the market, Deloitte said.

One crucial factor is the belief that prices for properties in existing housing estates will soften once the new affordable schemes become available.
“The current shift from a positive-neutral price expectation to a neutral one may reflect this belief and signal the interim phase before expectations turn negative early next year,” Deloitte said in its second quarterly survey.

It added: “With the negative effects of the credit crunch still around for a few more months, along with falling property prices in Spain and no sign of an interest rate cut by the Bank of England, we expect residential property prices in Gibraltar to slightly come down in early 2008.”
The level of recent sales activity also suggests a slowdown in the market, Deloitte said.

In June 2007, some local agencies were completing 20 or more deals per month. In October, responding to the latest survey, most agencies said they were completing around 10 sales per month.

According to Deloitte, real estate agents generate the vast majority of their business from the local market, with the Spanish sale accounting for less than a quarter of their total sales. The properties most in demand are two-bedroom homes priced between £200,000 and £500,000. Even so, some 17% of respondents said sales in Spain now accounted for over 50% of their business.

Deloitte suggests a number of possible reasons, not least the softening of the local market which may be driving agents to seek revenue elsewhere.
The drop in Spanish house prices could also be a factor, as might the new dual income tax system which may be encouraging people to buy in Spain, forgo their allowance here and opt for a lower income tax bracket. “Whether this is only a seasonal phenomenon or a more permanent change, only time will tell,” Deloitte said.

RISING COMMERCIAL DEMAND

In contrast to the residential market, rising demand for commercial properties is having a knock-on effect in prices.
Of the agencies polled by Deloitte, some 83% expected rents on commercial properties to head north in the coming months.
“This is not surprising given the shortage of office space in Gibraltar, and it seems that the problem is only exacerbated by the inflow of new international business and gaming companies into Gibraltar,” the Deloitte survey said.

“Policy-makers should be paying particular attention to this problem as the more acute it becomes, the lower the attractiveness of Gibraltar as an international finance and business centre.”

Deloitte’s Gibraltar Real Estate Survey is a quarterly report that provides a snapshot of the local property market, identifying key trends and reflecting the expectations of real estate agents active in this crucial sector of the local economy.

http://www.chronicle.gi/readarticle.php?id...tar%20Chronicle

I JUST VISTED GIB TO LOOK AT A STUDIO FLAT WELL OVER PRICED ,UNLESS YOU WANT A JOB SELLING DODGY SHARES OR A JOB IN MORRINSONS,WHY WOULD YOU WANT TO LIVE THERE IT IS A GARRISON TOWN ,PLYMOUTH ON THE MED

Gib Banks Try And Prop Up Ailing Housing Market


NATWEST LAUNCHES LOCAL 100% MORTGAGE

NatWest Bank is launching a new 100% mortgage in Gibraltar. NatWest says this is one of a series of measures designed to demonstrate its ongoing commitment to the mortgage market in Gibraltar and to highlight its determination to help more first-time buyers onto the property ladder.

The new 100% mortgage is available to first and second time buyers and there are a choice of schemes. Applicants will need to show that they can afford to meet the monthly repayments but there will be no need to provide an upfront deposit.

“As one of the most experienced mortgage lenders in Gibraltar, we are aware of the difficulty that first time buyers, in particular, find in raising the up front funds required to provide a deposit on their first home, especially in a market where property prices continue to rise. Equally as responsible lenders, we also want to ensure that potential homebuyers take on a financial commitment that they can afford and we help them in this regard also,” said Robert Mancera, Area Retail Manager , NatWest.:

NatWest is extending the term applicable to all its mortgage schemes from 30 to 35 years giving customers greater flexibility with repayments and introducing a new mortgage calculator facility which helps in determining how much a customer can afford to repay each month.

URL for article above:

http://www.chronicle.gi/readarticle.php?id...tar%20Chronicle

Is Natwest the Natwest that we know? The reason I ask is that Barclays Gibraltar for example is not the Barclays that you find on the high street in the UK. They just pay to use the brand name and offer the typical substandard, 3rd world service that you expect out there.
I had heard that certain banks in Gib had stopped offering mortgages completely on property in the CDS. This leads me to think that this offering is firstly a gimic, with very strict conditions disallowing the vast majority of people that would typically go for a 100% mortgage. Secondly, the Gibbos for some reason think that they are insulated from the trainwreck that is going on down the coast. How typically arrogant of them. After years of laundering money from eastern european gangsters they have got so rich and arrogant. What a horrible horrible place.