Jones Lang LaSalle (JLL) believes that the housing market will continue to experience a shortage in supply due to the increase in rental prices. It was also suggested that the Macau government’s announcement of a plan to release thousands of public housing units will not affect the housing market in the short term.
Jeff Wong, a director from JLL, pointed out in a press conference last week that the transaction volume of residential properties continued to shrink in the first half this year. In the period between January and May, there were only around 3,700 cases of property transaction, slowing by more than 45 percent compared to the first five months of last year. This trend, the director believes, is going to continue in the near future.
Jeff Wong named several reasons behind the shortage of property supply. One of them, he believes, is the high price of rental properties. “Although there is a two-year lock-up period in the special stamp duty [policy], there are some properties that are going to reach the end [of the lock-up period]. People had expected that they were going to return to the market.”
“However, we still haven’t seen a large increase in supply. The major reason is that the rental return in the previous two years has surged significantly.”
The director explained that if a proprietor bought a residential property two years ago, they are now able to use the rental income to cover the mortgage payment and can even earn extra cash from it.
“Therefore, although the lock-up period [of their properties] has ended, we still don’t see many proprietors selling their properties. It is because the return in rent is very desirable,” Jeff Wong explained.
Moreover, the director suggested that the law regulating the presale of properties has also limited the range of properties on offer. He suggested that only in the second half of next year will certain buildings meet the criteria and subsequently be available in the market.
Under these circumstances, where there is a shortage of supply in both the new and used markets, and due to the fact that people are expecting a steady upwards trend in Macau’s economy, Jeff Wong predicted that there would not be a big increase in the number of property transactions. Furthermore, he suggested that a decrease may actually eventuate.
Concerning the rental market, the JLL director pointed out that the rental price of residential properties in the mass and medium markets has increased by 12.3 percent in the first half of 2014. Meanwhile, the rental price of properties in the high-end market has risen by 7.1 percent. He suggested that the increase in the mass and medium markets is due to the fact that many of the non-resident workers are mid-level managerial staff. The director predicted that rental prices in the mass and medium markets would continue to rise in the second half of 2014.
When asked about the newly announced government plan to build 28,000 public housing units and 4,000 private residential apartments in zone A of the future reclamation area, Jeff Wong expressed the opinion that the government is headed in the right direction. He believes that this policy will give confidence to Macau’s residents and ease the “housing panic” in the city, which has prompted some residents to purchase houses at a more “aggressive” price.
Nevertheless, he pointed out that the decision is not going to increase the supply in the market in a short period of time. Therefore, he called on the government to speed up the planning process for a number of idle plots of land in order to increase the supply in the private market. This measure, he believes, will be more effective than simply building public housing in zone A.
Meanwhile, JJL’s associate director, Alison Yip, said that the value of some of the offices in the Praia Grande area has reached MOP10,000 per foot, an increase of 44 percent compared with the previous year’s value.
With the continual rise in demand for office space and the shortage of supply, rental prices of offices also saw a notable increase of up to 60 percent. Ms Yip has predicted that some smaller enterprises will start looking into renting units in industrial buildings in order to avoid the high rental cost of offices.
Ms Yip expressed the hope that an increase in supply will be aided by the future development of Hengqin Island.
RICACORP predicts less than 10,000 transactions this year
Ricacorp Macau’s managing director, Jane Liu Zee Ka, has estimated that there will be a fall of up to eight percent in the number of property transactions made in the second half of the year. The real estate agency forecasts that more local investors will shift to the Hong Kong property market and buy residential or commercial units there. This is because the return in rent in Hong Kong is higher. According to Ricacorp, the sale and rental prices of local residential, commercial and industrial properties will rise by a minimum of 10 percent in the second half of the year, due to the shortage in supply.