In 2008 Q4, the average purchase price of residential units was MOP$1,678.00 per square feet of usable area. Just within a period of two and a half years before the administrative measure to be imposed by the government, the same amount had more than doubled (at MOP$4,112 in the year of 2011 Q2). To curb the sudden rise of housing prices and to maintain Macau’s housing affordability, in 2011 the Macau government introduced Law No. 6/2011, creating a special stamp duty of 20% payable upon sale of residential properties if the property is transferred within the first year, and a special stamp of 10% if ownership is assigned within the second year. Supplemented by Law No. 15/2012, this aforementioned special stamp duty was extended to commercial properties, offices and parking space, plus an additional stamp duty of 10% for buyers of residential properties that are legal entities, sole proprietors and non-residents.
This stream of measures had the effect of shifting the focus of some investors and foreign buyers for a brief period of time, thus slowing the market. However, with the monthly increase in gaming revenue, the housing market has started to regain its old momentum since the second quarter of 2016, with an increase of 20% in house prices compared to the same time last year.
As such, and not surprisingly, the Macau government has once again seen fit to devise new ways to combat speculation and regulate the real estate market.
With the aim of controlling excessive investment, promoting stable development of the housing market and supporting local banks in their risk management, the Macau government has decided to apply “adjudgment measures” for foreign buyers, non-first-time buyers of residential properties and purchasers of properties off the plan.
For the purposes of these measures, starting from 5 May 2017, a Macau resident is considered a first-time buyer when they do not own more than 50% of any residential property during the application of financial credits with banks. Properties obtained in the form of donation or inheritance are excluded from the criteria.
Moreover, mortgage lending limits will reduce 10% to 20% for non-first-time buyers who purchase residential properties valued at MOP$3.3 million or less. They will now only be able to borrow up to 70% of the property value, as opposed to 90% previously. The loan-to-value ratio (“LTV”) for mortgage lending will thus be adjusted from 90% to 70%; in relation to properties ranging from MOP$6 to 8 million, the LTV limit will be adjusted from 60% to 50%; and in relation to properties above MOP$8 Million, the LTV limit for mortgage lending will be adjusted from 50% to 40%.
Further, in relation to foreign buyers and buyers of properties which are still under construction, they will face a 10% reduction in each price bracket.
We applaud the government for consistently introducing market cooling mechanisms with the intention of protecting Macau’s residents’ ability to purchase in the ever-growing housing market. We do, however, wonder if the paltry alterations to the mortgage lending rules will have any significant effect on real-estate investors and foreign buyers in the luxury market where housing prices regularly exceed MOP$8 million.
Moreover, and regarding the two major stamp duty laws, we believe that there are still loopholes which investors can exploit, such as resorting to family members with first time buyer status or joint-ownership of several properties, which are common solutions to these types of taxation constraints, as seen for example in Hong Kong: Wealthy investors find loopholes in the newly implemented stamp duty regulations in Hong Kong and take major advantage of the newly established stamp duty tax reductions. The Macau government should take this as a cautionary tale and continue to find effective and practical measures to improve the quality of the Macau housing market, where investors and individual home buyers can coexist.
* Associate, MdME Lawyers