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Opinion & Analysis

‘Spring will come and so will happiness. Hold on. Life will get warmer’ - Anita Krizzan

Eyleen Gomez

By Louis Montegriffo

We thought this quote was apt under the current times that we find ourselves in, more importantly, we wholly believe in the sentiment that we will see warmer times and an end to the surreal way of life that we have been dealt under Covid-19.

It is clear that our way of life, how we interact and how we do our business will not just be impacted for the short term but may also be with us for the medium to longer term.

The fact that a great many of us are now able to work from home and are able to do so effectively will have a knock on effect on the future planning of businesses and their office space planning requirements; it will also influence how we choose to live our lives at home and how demand for property sizes may change because of this.

We believe that changes although hard to adjust to, will invariably bring positive elements too, and do have the capacity to teach us and remind us, on occasion, of how we may take the simple things in life for granted, how we have ignored a real call for environmental change (the skies are cleaner) and how looking after our health and taking positive steps towards it can make a real change for the better; I refer to the latter as I do not recall ever having seen so many people, cycle, power walk, jog, training or enjoying the many nature trails that we have locally…….. ever! Our prospects for the next Island Games are huge..;)

The market is dead, long live the market.

As first outlined nearly five weeks ago in our first Covid-19 update, we remain fully active and open for business, both at the office and remotely at home.

We wholly continue to manage our lettings portfolio which remains unscathed by Covid-19; our Landlords and our Tenants will be receiving our circulars with updates on any changes to their portfolios and importantly all rents due are being met by tenants and paid to landlords via our management services team.

Over the past five weeks we have pushed hard to maintain a presence in the market, as well as assessing the conditions under Covid-19 and the lockdown.

Whereas we were bracing ourselves and expecting all “new business” to grind to a halt, we have been surprised with the general up take by applicants over recent weeks, post lockdown. Our focus had been to maintain and manage all existing and pending sales in the pipeline and we are delighted that ALL have either completed or are set to do so in the coming weeks.

We see this as a good indicator of the mindset in the market and the general view that, the market wants to continue to drive the market. We were hugely encouraged by the fact that our clients and applicants respected their positions and continued with their commitments; needless to say we have been guiding and advising throughout these uncertain times and provided the support that we have been recognised for over the past two decades.

Although clearly still too early to say, we are optimistic that Covid-19 will not adversely affect the market in the medium to long term. So far, applications to let and interest in our residential sales portfolio suggests that although the market is substantially quieter, there is movement and WE ARE letting and selling properties, albeit under a rather heavy cloud of uncertainty and somewhat different methods of showing our properties listed.

There is no question that the volume of interest has slowed down, to suggest otherwise would be foolhardy, but the fact that there is activity is a positive from our perspective and we are working hard to maintain a real presence during these difficult times; importantly, from our own perspective and akin to the sentiment taken by Gibraltar Inc, we want to be in a solid position when we come out of this.

Our market position prior to Covid-19 and where might we be further compromised, or not.

Prior to Covid-19, we had been warning of a slight over heating in the market in particular segments, these segments will no doubt be suffering the brunt of the impact of Covid-19; speculative markets will undoubtedly be the worst hit during down turns, but our belief in the four tier market which we have seen grow over the past two decades will, from our point of view, hold its own and will not (in our opinion) be dragged down by one segment of the market.

Our portfolio listings in both sales and rentals had seen substantial increases in volume, particularly in lettings and we had already seen a signal of adjustment in pricing, where there was already a clear oversupply in new build smaller buy to let, speculative units.

Conversely, the owner / leasing occupier sector driven by larger units in all ranges, one to four bed units had held well given the lack of supply in this sector, and in some cases we experienced increased prices in sales and rentals because of this further underpinning the maturity of the sector in general.

We considered 2018 /2019 to be crucial years in many respects and of course we have highlighted Brexit negotiations as a real factor on how the market would develop. We have always firmly believed that new off-plan developments should be primarily driven by that fundamental sector known as the “owner occupier market”, without it there is no market and the sector falls prey to speculation. This is only further amplified under our current status quo.

We had expressed concern with proposals primed solely at the investors market and offering only one product such as the studio / small one bed unit with overly high rates / sqm. We will continue to follow and review this sector.

Historically, and during uncertain times, the safer investments have tended to feature mixed distributions of 1 – 4 bed layouts.

These owner occupier lead developments have consistently rewarded investors because they (by default) reduce exposure to just one market or applicant profile, and thereby increase percentages of owner occupiers who tend to seek 3 / 4-bedroom properties; this reduces risks by splitting markets up and attracting varied profiles.
Opportunities will invariably present themselves.

BoE have reduced interest rates once again to the lowest levels ever, thereby providing cheaper access to borrowing, we have noticed some investors keen to jump into the market for the right deals, which do exist if you are looking at your medium to long term exposure. Over recent weeks we have entertained various portfolio investors in this regard.

Looking at the bigger picture and considering Gibraltar’s historic ability to overcome hurdles, there are indeed opportunities for all, and not just the savvy investor. We believe that the appetite is there, albeit overshadowed by an uncertain eye; and true to the nature of our small, diversified and dynamic economy, our innate ability to seek new goals and new markets will be sought and found.

It is the very basis upon which Gibraltar has survived and flourished in the past.
In summary…

Navigating this chapter in our story is of course crucial and to date we (Gibraltar Inc) have done phenomenally well in managing the primary factor of this virus, that being the health and well-being of our health service. Government has also taken crucial steps in managing what is essentially an economy in partial levitation (the pause effect).

The BEAT Covid19 facilities to business’ in real need, have provided a much-needed fiscal lung and adds a level of comfort and confidence to our economy and in the Governments handling of this crisis. Their steering and management to date has been nothing short of exceptional, in all aspects, but in particular, their steadfast grip and resolve in minimising the clear anxieties we all feel, from the personal to the fiscal.

We say this with No agenda, but rather a show of support and thanks; and we do so with the firm belief that this will pass and we will be stronger, wiser and better placed to emerge from this in the best possible form.

Moreover and as mentioned by the Minister for Financial Services, it will be our capacity to deal with this crisis in the manner that we are that will earn us the respect of those seeking to invest and re-locate to Gibraltar as we see brighter days emerge; for it is the example we show during these difficult times that will instil confidence in our economy and way of life for the future.

We hope you are all staying safe and doing well and wish you the very best during these grey days.

#staysafe #stayintouch #haveanoutstandingday

Louis C. Montegriffo is the Managing Director of BMIGroup, a Gibraltar-based estate agent