Consumer confidence and treaty certainty has stabilised property market

After years of downturn the property market is stabilising, BMI managing director Louis Montegriffo has said, pointing to improved confidence ahead of the implementation of the treaty.

Mr Montegriffo described an “arresting of the slowdown” that had seen years of decreasing property values and supressed buyer activity in the years following a Covid boom.

The pandemic resulted in a dramatic price rise of between 50% to 100% across the sector and in the years since the market has realigned with prices decreasing.

Mr Montegriffo believes the market is “bottoming out of that curve” as BMI has found stronger activity over the past few months.

"We've definitely felt the impact of not the agreement and the treaty, because it hasn't been done, but certainly the confidence behind it's going to happen," Mr Montegriffo said.

He described a “mood change” in the market as the physical work of the treaty at the frontier is visible and the sentiment is that it is happening soon.

The treaty is expected to be implemented as from July 15 and Chief Minister Fabian Picardo has recently confirmed that deadline is being kept.

“We have started the year incredibly well, particularly the first quarter,” Mr Montegriffo said.

“What we've seen is a great deal more movement, a great deal more sales than we had anticipated, although we were anticipating 2026 to be better than the previous years.”

He pointed to the “middle mainstay sector” of larger owner-occupied homes valued between £700,000 and £1.5 million and BMI has been “very pleasantly surprised” by the movement in this sector.

For Mr Montegriffo owner-occupied activity in that sector is significant because it reflects people choosing to live and work in Gibraltar rather than speculative investment.

“This time four years ago, which is when the market in my view peaked and it started to come down and we knew that it was going to go down. It was because inflation, interest rates driven by the war. It was an unsustainable growth.”

“You can't carry on growing forever and therefore it was logical that things were going to have to rebalance. Now it's the opposite effect. Now we've got certainty.”

“We've got an agreement in place. We've been through that dip. Dare I say, where the world continues to be in crisis, places like Gibraltar will do well.”

He said this is because wealthy individuals turn to places like Gibraltar and Monaco in times where the world is in crisis.

“Now a lot of the conditions and factors that we're looking at tend to be quite positive for June and certainty I think is crucial, that we're able to say to clients that certainty and certainly this is what you're going to have,” Mr Montegriffo said.

RESIDENCY

The Government last week announced changes to the Category 2 regime, increasing the application fee and raising the minimum net wealth requirement from £2m to £5m.

Last October the Government had temporarily suspended new residency applications after interest tripled.

Mr Montegriffo recognised the need to introduce the suspension and change the criteria.

“The rules for Cat 2s have been essentially £2million net worth for the past 20 odd years, that has to change very simply because 1% of the UK is worth £2million,” he said.

There is the potential that 1% of the UK could access residency in Gibraltar.

In an interview prior to the announcement Mr Montegriffo had said he believes that the criteria could change from net worth to investable income, and this cap could rise to £5m or more.

“I think that criteria is changing and my view is it's changing for the better,” he said.

He expects to see a trend to large two, three and four bedrooms in modern developments when the residency pause is lifted.

“We feel that that's generally what people will want. They won't want to be in a small place.”

Mr Montegriffo has seen a handful of property sales in the tens of millions of pounds.

He described how Gibraltar has struck the right balance over the past 20 or 30 years with attracting high net-worth individuals while offering the affordable housing market.

He added that there have been developers who had projects greenlit by the DPC during the last boom who have been caught out by the downturn.

“Anyone who's got planning and who can wait would be wise to,” he said.

He explained that this is as property prices have currently stabilised during this period but are not expected to “shoot up”.

The rental market has been the “star performer during the downturn”.

“That's a really good sign, because it wasn't that the economy was dying, because the GDP's actually continued to grow over a period of time,” he said.

“It was that the property market was unstable because of the insecurities and instabilities and the growth that we had and the vulnerabilities that we had because of the wars and the invasion, but you still had people coming in.”