Private housing should not be forgotten, says JLL Macau

Real estate services firm Jones Lang LaSalle (JLL) Macau is calling on the government to attend to the current private housing situation, which currently has only approximately 7,000 units under construction.

According to the managing director of JLL Macau, Gregory Ku, the SAR’s residential market is expected to face challenges in view of the limited housing supply in the short and medium-to-long term.

“The government should proactively find ways to increase land supply and speed up the process of urbanization to prevent Macau’s property market from facing the dilemma of supply  discontinuity,” said Ku.

“If we look at the government’s website, we can only see some 7,000 units that are under construction, and more than 2,000 have already been sold in the pre-sale scheme.”

Although there are around 14,000 units that are currently being planned, Ku implied that the public would have to know when construction would commence for these units.

As public housing is subject to restrictions and limits, Ku said that he believed that there should be a great supply for the private sector for those wishing to upgrade their homes.

He also remarked that upgrading houses would be difficult, as the urban renewal plan is not making progress.

“I think they should speed up [the urban renewal plan] as soon as possible. I believe it’s the time for them to go to the legislative council to set up rules and laws,” said Ku.

Meanwhile, the total residential sales transaction volume in Macau contracted significantly in the first quarter of this year due to the China-U.S. trade war that dampened investment sentiment. 

On the supply side, developers mostly adopted a wait-and- see approach in the first quarter of 2019 and only started to launch their projects in the second quarter.  During first quarter, a total of 575 presale transactions were recorded, accounting for about 14.7% of the total number of residential transactions.

In the first quarter, the capital values of high-end and mass-to-medium residential properties fell by 3.5% and 1.8% respectively compared with the end of 2018, due to external economic uncertainty, while yields were 1.6% and 1.7% respectively.

“Due to the external economic uncertainty and the easing home purchase policy in Zhuhai, local developers are facing difficulties in adjusting the asking prices of their new projects upwards and need to offer various incentives to boost sales,” said Jeff Wong, senior director of capital markets at JLL Macau.

In the sales market, a total of 195 retail property transactions were recorded in the first five months of 2019, down 41.6% year-on-year.

Notable sales transactions included the sale of two ground floor shop units at Edf. Kam Yuen for approximately HKD300 million and a basket of ground floor shops in the commercial podium of Edf. Jardim de Wa Bao for approximately HKD415 million. 

According to the JLL Macau Retail Index, the overall retail rental values remained stable in the first quarter compared with results from end 2018, while the overall retail capital values fell slightly by 0.4%.  The overall retail yields were maintained at 1.8% as of June 2019.

“The negative outlook of the retail leasing market has led to a fall in the volume of retail sales transactions.  The number of high street shops available for sale or lease in the core areas has been increasing.  Though retail capital values didn’t see a significant fall in 1H19, investors will expect a higher investment yield to offset the potential risks under the current economic uncertainty,” says Oliver Tong, head of leasing at JLL Macau.

The JLL Macau team at their office on the peninsula