The residential property market rebounded amid a period of robust primary sale prices, leading to strong price growth in some of the residential projects, according to JLL, a global real estate services and investment management company, in its Macau mid-year property review for 2017.
Mark Wong, a senior manager at JLL said, “the overall economy in Macau performed quite well in the first half of the year, underpinned by the active investment sentiment with the launch of several new residential projects.
“The government’s implementation of cooling measures to curb the overheated property market, which lowered the loan-to-value ratio for borrowers, who are not first-time homebuyers, coupled with the Federal Reserve’s interest rate hike and contraction of balance sheet, is expected to reduce the total residential transaction volume in the short term.”
“However, with the economic fundamentals in Macau remaining optimistic, the completion of a large-scale gaming facility within the year and the positive effects that will be brought about by the completion of the Hong Kong-Zhuhai-Macau Bridge, we expect Macau’s property market to remain healthy and stable in the second semester,” said Wong.
The total residential sales transaction volume in Macau continued to grow during the first half of the year. According to the MSAR government’s statistics, a total of 4,690 residential sales transactions were registered in the first five months of 2017, representing a significant growth of 49.1 percent year-on-year.
Investment in the overall residential market was active in the first six months of 2017, due to the positive response to the launch of presale projects, according to JLL.
The capital values for high-end and mass-to-medium residential properties rose by 8.8 percent and 6 percent respectively between January and the end of June, compared to the end of 2016, while yields decreased to 1.3 percent and 1.5 percent respectively.
The JLL report also said that the rental values for high-end residential properties grew by 3 percent and remained stable for mass-to-medium residential properties, compared to the end of 2016.
“In fact, the government may explore the possibility of adding additional binding terms and conditions to the public auction, such as requiring successful bidders to reserve part of the floor area for building community facilities like public youth apartments,” said Jeff Wong, Head of Residential at JLL Macau.
“This can help prevent the transaction prices from being pushed too high on the one hand, and alleviate the demand-supply imbalance in the sandwiched-class housing sector while encouraging the developers to bear some corporate social responsibilities on the other.”
The office market in Macau remained broadly stable in the first half of the year. During the first five months of 2017, the total number of new incorporations registered in Macau was 2,256, up 22 percent year on year.
In the sales market, the number of retail units sold in the first quarter of 2017 totalled 170, up 32.8 percent year-on- year.
According to JLL Macau Retail Index, the overall retail capital values dropped by 1.4 percent in first half of the year, while the overall retail rental values fell by 6.4 percent, compared with end of 2016. The yields for the overall retail market fell to 1.8 percent as of June 2017.
Oliver Tong, Head of Retail at JLL Macau, said that “the Legislative Assembly has voted through the new bill currently, trying to exert control on the real estate leasing market by means of administrative measures.”
Tong added that the administrative measures might put the landlords, “at risk of bearing unnecessary losses caused by the offering of rent-free periods, property tax, and capital expenditure.”
When asked how JLL sees the government’s earlier policy which tightened mortgage lending conditions for both non-first-time resident buyers and non-resident buyers who purchase a residential property, or enter into a pre-purchase of an unfinished flat, Wong replied that JLL does not endorse the policy because, “Macau is a free economy market, and the restriction does not benefit Macau’s commercial environment.” In turn, Wong suggested that the government should try increasing the supply of houses instead of restricting the market.
Wong admitted that the government policy worked but reiterated that that tactic harms the free market and that it is not the best practice.