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Opinion & Analysis

What next for the property market?

By Mike Nicholls

Will property values hold to pre-pandemic levels, rise, or fall once we are out of this crisis? Whilst there is no crystal ball, there are some fundamentals we can draw upon to help predict.

Online

The pandemic is both teaching the world to go online for shopping and entertainment and proving to businesses just how crucial it is to establish an online presence. This could cause a structural shift, which could ultimately result in established online retailers, technology and logistic companies benefitting from a permanent boost in demand. In the property world, that means warehouse space will be in higher demand, whilst high streets may continue to suffer as more customers learn the benefits of online shopping. Hi-tech hubs dotted around the world will most likely lead the new craving for online entertainment, leading to a consequent increase in property demand in such places.

Asia

Trading levels of property in Asia, which has not been hit as hard as Europe and the USA, are reportedly down to 2008/09 levels in terms of volume and thus the market is too thin to be able to extrapolate too much information. The investment property world is on pause.

Demand

The pre-pandemic demand for property in Gibraltar, UK and in much of the western world, doesn’t go away. Indeed, there will be a craving after this lockdown for family members to live in their own space. In respect of Gibraltar, I would imagine once we are out of this, there will be a further desire for employers to have their employees in Gibraltar and, therefore, not commuting across the border. Although the frontier fluidity has been maintained to a large extent and the relationship with Spain throughout this period appears positive, the benefit of local staff is clear. The many new studios and one beds being built could be a welcome relief to employers and employees alike. So, another reason for Gib living which adds to the Spain / Gibraltar tax agreement advantages we recently wrote about.

Equity

There’s a lot of equity out there still to be invested. Even more so as investors pull out of the volatile stock and bond markets. Investors see opportunity in the property market and this will help maintain values, especially where the long term income from a property investment looks secure.

Upturn

The V shape optimists are dwindling. The U shape recovery is taking over – just how steep is the U and how long does the bottom last? The countries that can test, test, test the most and free up citizens with antibodies and or those who have recovered, will be able to start the economy again the quickest, whilst their vulnerable population remains in isolation. Germany seems to have got off to a good start in that respect.

Conclusion

Very hard to predict. Thankfully for the property market, this pause is not bank related. Indeed, banks look in ok shape currently with all the lessons learned from 2008. Demand may shift across sectors, opportunities will arise, but people still need to live somewhere and writing this piece in Gibraltar, what better place to be, through good times and now not so good. Bricks and mortar will remain long term sound investments.

Note: This article was first published on the Chestertons blog and has been reproduced with kind permission.