We spoke with Kasper Thy Jessen (Head of Corporate Banking) and Morten Jensen (Head of Mortgages) to determine where they see the property market (specifically the Buy-to-Let) heading in the future and what does this mean for Trusted Novus Bank (TNB).
The property market in Gibraltar has developed positively for a number of years. This is due to a combination of factors including high demand for rental properties, rental yield being 4%-6% on average and the absence of locally applied Capital Gains Tax.
With a high demand for Buy-to-Let properties, TNB recently developed a new product concept to support and facilitate the residential rental market.
Can you explain why TNB decided to explore the Buy-to-Let market?
This has been an interesting market in Gibraltar during the last few years; a big part of the property market where we have seen several developments geared specifically to the Buy-to-Let target audience (E1, Eurocity, West One, Marina Club etc.). We’ve also experienced that many property investors are interested in partners that can help fund these purchases and we are very interested in helping them with this.
Mike Nicholls, CEO of Chestertons (Gibraltar) mentions “Buy-to-Let landlords in Gibraltar have achieved consistent gross yields of 5% - 6% pa over recent years. These have eased to 4% - 5% pa recently with sale prices moving sharply ahead in 2021. Larger, more expensive properties tend to have lower yields.”
How does this align with the overall strategy?
TNB’s aim is to be the ‘Homeowners Bank’ and as part of this we also wish to support clients (and prospects) whose goals are to expand their property portfolio or are creating a portfolio in the Buy-to-Let market.
Our main focus is to grow our general lending book; hence we have been more active on marketing our residential mortgage and construction finance products. The Buy-to-Let market is a newer market for us and we’re hoping that by also focusing on this we can contribute even further towards the overall lending growth.
How does the Buy-To-Let product differ from our competitors?
Due to our highly personalised approach, we believe that we can find the right solution for our clients and be able to build strong long-lasting relationships. We want to be more than just a bank; we understand the importance of being partners.
We believe our products are highly competitive and, as we offer a broad range of banking services including investments, we are able to blend long term investments in financial markets with Buy-to-Let loans to offer low lending rates with flexible options for borrowers. This provides maximum rental yields whilst allowing diversification across a wider asset base.
How has Brexit affected our Buy-to-Let business?
Indirectly, and due to the potential new border agreement, Gibraltar has been seen as a popular area for investments.
Gibraltar’s Covid 19 vaccination program had the same effect, and this showcased Gibraltar as a country worth investing in. We received a large number of enquiries regarding Buy-to-Let mortgages earlier this year, this was from both local people and international (mainly UK).
Who is our target market for Buy-to-Let?
Our target market is primarily clients and prospects who have some previous knowledge and experience in the Buy-to-Let market.
TNB is taking a cautious approach towards clients with no or very limited experience in buy-to-let property activities. History in other jurisdictions shows that where there has been a rapid boom in the buy-to-let market, some clients exposed themselves to high-risk investments whilst not fully understanding the risks involved.
We also expect our clients to have good knowledge of Gibraltar, meaning that they either live in Gibraltar or visit on a regular basis.