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.
In last week’s article we explored just one of the factors that will influence property prices this year.
In the second part of this article we look at another three factors, and remind readers that Macau property prices are influenced by at least seven variables and may potentially be affected by many more.
As a reminder, the more variables there are, the more complex the equation. The more complex the equation, the higher chance of inaccuracy.
In no particular order and carrying on from last week;
Gaming & Related Growth
As we are all aware, the state of the Gaming sector is the fuel for the Macau economy. Diversification? Not happening.
As growth slows and related projects are delayed, budgets are cut and there are less new people arriving that require housing. Those that are here already are faced with tighter purses and less urgency.
However, when a decrease slows down and stabilizes, the drop in revenue will usually have had a positive effect on the business.
A lot of the ‘fat’ will have been cut away, and companies are forced to become more competitive and client centric instead of shareholder focused.
Do you see a rebound in the gaming industry growth?
A rebound may not be as important as a stabilization of the revenues. Steady revenue allows companies and governments to plan and budget accordingly.
The new projects and attractions due to open this year may just have a stabilizing effect.
Macau Government Policy
It seems that the Macau government is under increasing pressure to interfere in the free housing market.
They will attempt to implement policies that may be designed to either slow down or speed up the housing market such as rent control or the supply of low cost housing.
These attempts to influence the market rarely work out as planned, and often have an opposite effect.
Why? Because there are too many variables to be able to predict the outcome.
For example, rent control policy will cause landlords who are already reluctant to rent their properties to take them off the market.
Since rental yields are incredibly low, many owners don’t want the hassle of having tenants in a property. This is of course reduces supply, in turn pushing new rents even higher.
As rental prices rise, it is not long before the cost of renting is high enough to warrant purchasing instead, and selling prices start to rise again.
So will the government interfere with the free market? Based on past observations, our guess is that they probably cannot help themselves.
China Government Policy
As we can see from this past year, Macau is dependent upon the visitor traffic and revenue from mainland China visitors.
China government policy and travel permits to Macau are at the heart of the numbers, and if the tap is turned down, gaming growth is adversely affected.
If policy is relaxed the numbers are affected in a positive manner.
So the question becomes, what will China do this year? General speculation says that 2016 will be similar to 2015 in terms of government policy.
Next Week: The other three factors that will influence what you pay for your apartment in 2016.
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