Real Estate Matters | Some Interesting Facts About Macau Property – Part 2

Juliet Risdon

6. WHY PROPERTY PRICES ARE IN HKD

It is a common misconception that the reason property prices are HKD is to take advantage of the 3% difference in the currency exchange rate.

The real reason that prices are in HKD instead of the Macau Pataca (MOP) is that the MOP is not freely exchangeable, and is only valid in Macau.

As property transactions often involve overseas investment, it was vital to operate in an exchangeable currency so that money could be both remitted and sent overseas to facilitate transactions.

7. WHO CAN DECIDE ON THE RENTAL AMOUNT

The amount of rent paid on a property is a matter between the landlord and the tenant only; there are no restrictions from the government.

Whilst there have been discussions on rent control, the government has resisted the temptation to get involved in setting increment limits or limiting rents because it makes sense to avoid interfering in the market.

Furthermore, imposing artificial rent control measures could cause the opposite effect on the market and actually lead to an increase in rents if owners remove their property from the stock of available properties.

Of course it is a good idea to do a price comparison with rents before entering into a contractual agreement.

8. YOU CAN REPAY YOUR PROPERTY LOAN EARLY

If you have a mortgage loan with the bank, you can repay the loan early in its entirety or just partially.

This is an advantage if you want to reduce your monthly repayments to the bank and have an excess of cash through savings or a special bonus.

Be aware that the bank usually charge an early repayment penalty if you repay the whole amount within the first three years of the loan, and you can usually negotiate this fee with the bank.

9. PAYING RENTS LATE CAN BE VARY COSTLY

Rental payments that are overdue can quickly become a major issue in accordance with Macau Law

If a rental payment is nine days or more overdue, the landlord has the right to charge the tenant a further 50% of the monthly rental amount.

If a payment remains due after 30 days, the amount increases to 100% of the monthly rental.

In other words, if your rent is $10,000 and you are nine days late, the landlord may charge $15,000 instead. After 30 days that would be $20,000 and this amount is capped.

This is especially important for tenants who are under the impression that they can use the last two months security deposit for rent.

The security deposit may not be used as rent, and thus as soon as the first payment is missed and more than 30 days overdue, the security deposit is effectively wiped out.

10. THE MINIMUM RENTAL CONTRACT TERM

There has been a lot of social network discussions on the minimum contractual term, and a lot of confusion on the subject.

According to the Macau Government Website on Tenancy, there is a maximum period of 30 years that a rental agreement can run, but there is no minimum period.

If there is no time frame stipulated on an agreement, the government deems the agreement to be valid for one year.

However, under Section 1038 of Macau Civil Code, the Landlord does not have right to terminate a tenancy agreement for residential purposes within two years from the starting date of the lease term unless it agreed by both parties.

Simply put, it means that if you have an agreement that is two years or longer, the landlord cannot terminate the agreement prior to the end of the initial two-year period.

From February 2018 the two year term will change to three years in a revision of the law designed to further stabilize the rental market.

Juliet Risdon is a Director of JML Property and a property investor.

Having been established in 1994, JML Property offers investment property & homes. It specializes in managing properties for owners and investors, and providing attractive and comfortable homes for tenants.

www.JMLProperty.com

[email protected]