Long way to go for real estate market recovery: JLL

The city’s property market remained stagnant with no significant improvement despite the increase in visitors since the reopening of the border with China last year.
This was the verdict of real estate firm JLL in its Macau Mid-year Review 2021.
During the first half of 2021, the city has seen a gradual improvement in an economy that was heavily affected by the pandemic.
The fixed capital formation, private consumption expenditure and government consumption expenditure all recorded growth in the first quarter (Q1), up 22.0%, 14.8% and 0.2% year-on-year respectively.
“Recently Hong Kong and Macau are exploring the easing of the travel restrictions between the two cities. This will create a positive effect on Macau’s tourist and business sectors, and it’s especially important for the recovery of the city’s economy, retail and real estate markets,” said Mark Wong, director of Valuation Advisory Services at JLL Macau.
“In the short term, central banks across the globe are expected to continue to adopt quantitative easing monetary policies. With the new normal post pandemic, pent-up property demand will be released gradually. We expect Macau’s property market to remain stable in the second half of the year,” he added.

Residential sales transactions see uptick
The total residential sales transaction volume in Macau picked up in the first half of the year (H1), with most transactions recorded in the first five months.
The sales market slowed down in June due to the new wave of the Covid-19 pandemic in Guangdong province.
According to the official statistics, a total of 3,297 residential sales transactions were registered as of June, up 8.5% compared to the same time last year.
Pre-sale transactions totalled 225, accounting for only 6.8% of the total residential sales volume, lower than average levels recorded in the past.
The fall in the number of pre-sale transactions is mainly attributable to the fact that new residential supply has been gradually absorbed by the market.  As there will be no new supply of large-scale private residential projects in the coming five years, the market is expected to remain in the same condition, JLL predicted.
Meanwhile, the rental values of high-end residential properties and mass-to-medium residential properties fell by 4.9% and 13.0% respectively in H1 from end 2020, with yields recorded at 1.6% and 1.5% respectively.
“The overall residential transaction volume recorded in H1 was similar to that in 2020, with most transactions recorded in the secondary market. Buyers were mostly local first-time homebuyers, who comprised more than 70% of overall residential sales,” explained Gregory Ku, managing director at JLL Macau.
“Due to the pandemic, residential buyers in general have bigger bargaining power and transaction prices are largely close to the appraised values. Coupled with the current low mortgage rate environment, it’s now a good time for homebuyers to enter the market,” he added.

Office leasing market stable
In the first five months of 2021, a total of 2,459 new incorporations were registered in Macau, up 27.9% year-on-year. Travel restrictions between Hong Kong and Macau led to a delay in corporate decisions on leasing offices, creating pressure on the office leasing market.
However, despite the lack of new Grade A office supply, the leasing market still achieved satisfactory levels of transaction volume. Leasing demand mainly came from the insurance, finance and beauty sectors for business expansion. The achieved rentals were at similar levels as last year.

Retail property recovering
The retail property sales market recovered in the first five months of 2021.  A total of 161 retail property transactions were recorded, up 47.7% year-on-year. During the first five months of 2021, the number of retail property transactions increased significantly in residential neighbourhoods. Most properties transacted could bring a rental yield of about 2.5%.
According to statistics, total retail sales were recorded at MOP 18.75 billion in Q1 this year, up 68.0% from the same quarter last year.
“The retail vacancy rates in the tourist areas remain trending upwards, reflecting the limited impact that the reopening of the border can bring to the retail trades that require a high customer flow,” said Oliver Tong, head of Leasing of the firm.
As the pandemic has not yet been fully contained on a global level, retail property landlords in tourist areas will remain flexible and are willing to offer tenants bigger rental discounts.