It’s a question that we are asked almost every day; prices are high, is it too late to buy property in Macau?
Surprisingly its not a 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 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 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 you’re your destiny by owning it.
As an investor, you are well aware that prices are at a record high. No-one knows whether prices will go up or down in the short term, but if we look ahead 5 years the question to ask is ‘do I project that prices will be higher or lower than today’ ?
The demand for rental property keeps increasing, and it is highly likely that this situation will remain as the status quo for the next 2 years or more.
The points to consider include the possible opening of the border with China 24/7, the effect that Hengqin may have if it opens up, and what effect the Hong Kong / China bridge might 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. Through simple mathematics, the upside on Macau property is far more limited than it was prior to the explosive growth of the last two and half years.
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 hype, 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 established the company 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.