Since April this year, we have been seeing a considerable increase in the number of property transactions, such as the sale of three residential buildings, representing around 610 residential units sold and totaling to about HKD8 billion in sales. Last week, the acquisition of plots TN20 and TN24 in Taipa by the mainland developer Jiayuan International Group Limited was successfully completed for the price of HKD3.5 billion.
The hospitality market in Macau has also been active, with the completion of the Lan Kwai Fong hotel deal between two Hong Kong companies. Moreover, other hotels owned by satellite casinos and operators have been targeted by foreign investors, and we are confident that there will be significant movements in 2018.
The power of the Macau property market is not only the result of the economic principle of short supply and high demand, but is also related to the growth of the mainland economy, the uncertainty in the Hong Kong property market and, of course, Macau’s multibillion-dollar gaming industry. The market attracts the attention of Asian investors, mostly from mainland China and Hong Kong, who see Macau as a valid alternative to local markets that have been stagnant for a while.
After a slight correction of the Hong Kong real estate prices between the end of 2015 and the beginning of 2016, the prices in Hong Kong have resumed their impressive rise and, by the end of March 2017, beat the most recent peak of September 2016 by 4.5%. The average Hong Kong price per square foot is triple that of Macau. Conversely, the prices of Macau’s prime real estate have lowered in the past two years, along with the decrease of the casino revenues and uncertainty in the sector due to the land concession expiry issues. This cooled down the market in Macau, which in 2014 had reached the highest ever prices per square foot.
Also, the Macau tax system is more advantageous than that of Hong Kong – especially since the implementation of new measures in Hong Kong will cool off the residential property market, which increased the stamp duty for all residential properties to a flat rate of 15%. Likewise, the new measures implemented by the Chinese government for the acquisition of properties in certain regions of China have restricted the number of properties that can be acquired in such regions, which has made it necessary to diversify investment to unrestricted regions like Macau. The only restrictive measure that has recently been implemented in Macau was the loan-to-value ratios for second property acquisitions. However, this has not affected the recent growth of the market, since the majority of investors have the liquidity to overcome higher LTV ratios.
This means that the lowering of the Macau property prices – and the continuous confidence in the growth of Macau gaming revenues and overall economy – make the property market increasingly more attractive to investors aiming to diversify their portfolio.
Finally, the completion of new infrastructure such as the Hong Kong-Zhuhai-Macau Bridge and new developments in the reclamation projects will certainly play an important role in the decision to invest in Macau, as prices will be expected to increase in the medium to long term. Moreover, we must also keep in mind that not all recently expired lands will be used for public housing; several are expected to be tendered out by the Government, creating new investment opportunities yet again.
With this positive environment, we are sure that we will see a significant number of deals being closed this last quarter of 2017 and certainly a significant increase in the market in 2018.
*Senior Associate, MdME Lawyers