Property market poised to continue struggling, while rents set to rise

The property sector’s rental performance improved last year; however, prolonged high-interest rates dampened investment sentiment, leading to sluggish property sales.

According to JLL’s “Macau Property Market Review and 2025 Market Forecast,” the market is set to face ongoing challenges this year.

The city’s property market continued its adjustment in 2024 due to weakening external economic conditions, with ongoing challenges expected this year amid a lack of overseas investment and cautious investor sentiment, driven by high-interest rates.

Mark Wong, director of Value and Risk Advisory at JLL Macau, stated that while Macau’s local economy remains stable, it still heavily depends on tourism and entertainment. Other sectors, particularly those tied to local livelihoods, face mounting pressures.

He added that economic and interest rate policies under the new U.S. administration have also impacted Macau’s real estate market, slowing the confidence recovery.

Speaking about this year’s forecast, Wong noted that local developers and investors may release more properties to ease high-interest loan financing burdens.

For JLL, investment returns are expected to gradually recover, albeit at a slow pace.

The city’s residential transaction volume rose 4.9% year-over-year to 3,057 transactions, with 230 pre-sale transactions recorded, according to the Financial Services Bureau (DSF).

New home sales increased in mid-2024 following new project launches but did not sustain momentum in the second half of the year.

Two major projects obtained pre-sale permits in 2024, totaling 2,072 units, with the majority supplied by the Pearl Metropolitan project in the Macau Peninsula.

As of the third quarter of last year, 2,140 units were under construction or recently completed. Several major residential projects, including Soho Residence and Lake Yoho, are set to add a total gross floor area of 145,012 square meters in the near term.

The residential leasing market, however, showed an upward trend.

Luxury apartment rents increased 2.5% year-over-year, while mid-range residential rents surged by 13.7%. In contrast, capital values declined due to high-interest rates.

Luxury residential values fell by 11.4%, while mid-range residential properties dropped 9.7%. Investment yields showed slight growth, reaching 2.0% and 2.3%, respectively, for luxury and mid-range properties.

“Macau’s home prices have plunged over 20% from their market peak, with some units seeing declines of up to 30%,” Wong said.

Developers have adopted aggressive pricing strategies to boost sales, but these price corrections have resulted in substantial losses for recent buyers, affecting investment confidence and consumer spending.

Office market under pressure

JLL reported that the office market remained under pressure, with a 12.7% drop in newly registered companies in 2024.

Leasing demand was primarily driven by cost-saving relocation needs. JLL’s Macau Office Index recorded a 4.5% decline in overall office rental values, with Grade A office rents dropping 6.0% year-over-year. By Q3 2024, office vacancy rates stood at 12%.

Retail sales also suffered, with total sales value for the first three quarters of 2024 reaching MOP 53.48 billion, a 16.9% decline year-over-year.

Key retail categories such as watches, clocks, and jewelry; leather goods; and department store merchandise reported double-digit declines.

“The popularity of outbound travel and lower per capita tourist spending have slowed retail sector recovery,” Wong remarked.

However, the realtor expects retailers to actively seek prime locations to open new stores, including newcomers from abroad.

“The retail property market will likely maintain a polarized trend, with leasing activities remaining active for prime shops in tourist areas, while neighborhood shops continue to face pressure,” he concluded.

Recently, the Macau Real Estate Development Association forecasted a dip of 8% to 11% in the property market this year, adding that it may take up to two years for the market to begin rebounding. The association stressed out that the sector faced a downward trend in Q4 of 2024, despite the lifting of property curbs last April.