Even though 2012 has just barely begun, the market activity in January indicated that 2012 will see an increase in demand for local residential and commercial premises, whilst the construction of new developments will continue to be negligible.
This follows a similar vain to the activity in 2011, which once again highlighted the robustness of Gibraltar’s property market and the pivotal role our Finance Centre and growing international reputation plays in underpinning it.
I am confident that Gibraltar can weather the worst storms these uncertain times may throw the Rock’s way, and the past years have certainly demonstrated that, but based on my experiences, I also firmly believe there are issues we too can address internally which would add further impetus to the local property market.
For some time now I have been advocating a change from the current arbitrary based stamp duty system to a fixed rate of stamp duty irrespective of a property’s value. In my opinion a change to a fixed rate is the best way to ensure the system is fairer to vendors and purchasers and will prevent the distortion of local prices just because of arbitrary thresholds.
Under the current system if you buy a property that costs £200,000 or less, then no stamp duty will be payable, but if you a agree a purchase price of between £200,000 to £350,000, stamp duty is payable at a rate of 2% on the first £250,000 and the balance attracts a rate of 5.5%.
A buyer of a property with a value in excess of £350,001, will pay 3% stamp duty on the first £350,000 and 3.5% on the balance of the purchase price.
We nowadays often see vendors having to unfairly reduce their asking prices below their market value in order for purchasers to be able to afford the stamp duty. In this situation the vendor loses out, but it is also common for buyers to be also adversely affected by the current system.
Take for example the many Gibraltarians who need a larger property for their growing family. More often than not, their price range will tend to be in the £200,000 bracket, yet these families are forced to pay stamp duty at a time when their financial constraints are probably at their tightest.
By further way of comparison, under the current system a wealthy individual can purchase as many properties as they wish and avoid stamp duty as long as they buy properties at less than £200,000.
Gibraltar has always prided itself on its socialist roots, yet the current system seems strangely at odds with those principles and I sincerely hope the Government will review and replace it during 2012.
If you have any views on this, I look forward to hearing from you
Justin Bray
