Gibraltar is very much in the news with the Spanish authorities threatening to introduce fees for those passing through the Spanish border on their way to Gibraltar. The fact is that the “Rock of Gibraltar” has been very much a bone of contention for the Spanish government which is adamant that Gibraltar should be under Spanish control as opposed to UK controlled. Every now and again we see friction between the two governments and while these do not usually last for too long the ongoing spat earlier this week seems to be more aggressive than we have seen in recent times.
This has cast a light across Gibraltar and many people are now looking towards the Gibraltar property market and indeed wondering whether the ongoing difficulties between the UK government and their Spanish counterparts could offer an interesting opportunity in the property sector.
Property in Gibraltar
When you bear in mind that the population of Gibraltar is just 30,000 people it is a relatively small area of the world although there is no doubt it takes up more than its fair share of media headline space. The country itself is only 2.6 miles² and while it has its own government, tax regime, etc there are many connections with the UK including the old-style police force, old-style telephone boxes and the culture of the region.
Interestingly the property market in Gibraltar is going through a significant change much of which has been prompted by ongoing pressure on the Gibraltar government to shake off its status as a “tax haven”. It is very difficult for a country the size of Gibraltar, and bearing in mind the geography of the region, to prosper with traditional economic values therefore the likes of oil storage, tourism and online gambling licenses play a major role in Gibraltar government income. There is no capital gains tax, no inheritance tax, no estate duty, no VAT and only minimal income tax which are perhaps some of the reasons why it has been so popular in the past.
Quote from PropertyForum.com : “Gibraltar has proven to be a magnet for wealthy property buyers who can benefit from fiscal advantages as well as a plethora of new gaming, financial services and entertainment businesses, it is claimed. But is the tide now starting to turn?”
Many individuals have acquired property in Gibraltar to claim the tax status and the benefits which go with this although the government recently changed status regulations. So-called “category 2 residents” often referred to as the richest residents on the islands now need “approved residential accommodation” from the Gibraltar government. As a consequence they will be liable to tax on their first £80,000 of income as long as they have a qualifying certificate which is available through the Gibraltar authorities. One of the main provisos for the qualifying certificate is a bank reference confirming assets of more than £2 million.
Change in Gibraltar population
At this moment in time there are around 350 category 2 residents in Gibraltar although this figure is expected to fall as the tax changes hit home. As a consequence the Gibraltar property market is going through something of a change and as a means of attracting wealthy individuals in the longer term a number of new property apartment ventures have been authorised. Many of these new properties are valued in excess of £300,000 with some of them going for in excess of £600,000 and there is no doubt that the authorities are looking to attract a very different clientele to the country.
Interestingly a number of estate agents who are active in Gibraltar are confirming that more properties are been sold than are actually been made available. This is causing a significant uplift in demand and prices across the Gibraltar property market and while UK expats are very prevalent in the region it is also worth noting that many Spanish expats are also keen to take advantage of a very different tax regime.
Life in Gibraltar
While there is talk of luxury apartments, major property complexes and some of the wealthiest individuals in the world looking towards Gibraltar, it is worth noting that the business arena does not always reflect the wealth of the region. The main supermarket in Gibraltar is a Morrisons and, as we touched on before, it has an old style police force and an array of other elements of the old UK.
There is no doubt that life is starting to change on Gibraltar, aside from the ongoing spat with the Spanish authorities, with the government of the day under pressure to clean up the tax system and attract a very different type of clientele to the region. The authorities in Gibraltar are now looking towards long-term residents who can actually contribute to the local economy and spend significant time in the country. It is also worth noting that Gibraltar is a relatively low-cost base for those looking for access across Europe something which is perhaps irking the Spanish authorities at this moment in time.
The profile of property investors across Gibraltar is changing as the tax regime continues to develop in light of recent “tax haven” attacks by governments around the world. Residency regulations have been adjusted to increase the tax take from individuals investing in Gibraltar property and to encourage those acquiring property in the region to spend more time there. There has been and continues to be significant demand from UK expats as well as Spanish expats looking to reduce their taxation charges.
A number of estate agents operating across Gibraltar have confirmed that demand is now exceeding supply which would appear to offer significant short to medium-term support for the price of property in the country. We are also starting to see a total revamp of the Gibraltar property market with an array of luxury apartments under construction and more expected to follow. We will likely see an improvement in the shopping and retail facilities in Gibraltar as the move away from a so-called “tax haven” to a more acceptable “international finance centre” continues.