Real Estate Matters | Is now a good time to buy Macau property? Are prices going to keep climbing?

Juliet Risdon

This article runs at least once per year and should probably run more; Will prices keep rising, or should I wait for prices to drop before buying a Macau property?

As always, it’s not a simple yes or no response. The answer varies according to your requirements and circumstances.

The first decision to make is whether you are looking for a home or an investment property.
Just to be clear, it is fully understood that if you buy a home you also want it to be a good investment of course. The fundamental difference between a home and an investment property is simply ‘are you going to live in it’?

If yes, it’s a home. If no, it’s an investment property (even if you think you might live in the property later).

If you are looking for a home, the equation is relatively straightforward. Whilst prices are high, so are rents. By renting, the entire cost of your rent is a liability.

If you buy a property, only the cost of the interest is a liability, and the part of the loan payment that reduces the debt is an asset.

Although in reality it is a little more complex, the easiest comparison to make is between the amount you would pay in interest if you bought a home versus the amount you are paying in rent.

If you would pay less interest than rent, it makes sense to buy a home, especially when you consider the other factors such as the likelihood of rents increasing, and the instability of renting a property instead of controlling your destiny by owning it.

This brings to the fore the question of interest rates. We can say with as much certainty as it’s possible to muster in this unstable world that interest rates must rise at some point. They have remained at almost ‘zero’ for such a long time there is nowhere else for them to go, and as such it would be prudent to factor in a rise in interest rates.

As an investor, you are well aware that although prices have dropped from their record high two years ago. No-one knows whether prices will go up or down in the short term, but if we look ahead five years the question to ask is ‘do I project that prices will be higher or lower than today’ ?

The demand for rental property remains strong in this highly transient city, and it is likely that this situation will remain as the status quo for the foreseeable future.

Other points to consider include the possible 24/7 opening of the border with China, the influence that Hengqin may have if Macau is ever granted free access, and what effect the Hong Kong / China bridge may have on Macau.

If you believe that Macau still has room for growth, investing with ‘responsible’ leverage is the way to maximize your returns. By ‘responsible’ leverage we mean borrowing an amount of money that can be covered by the rent on the property under normal circumstances, and can be covered from your own pocket if necessary.

On the other hand, if you are lucky enough to be able to purchase a property using only your cash, the investment and return may not be so attractive now.

In summary the decision on whether or not to buy a property depends primarily on your circumstances and requirements. Our suggestion is not to get carried away with the idea of getting rich, and only do things that allow you to sleep peacefully at night.

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

info@JMLProperty.com