Real Estate Matters | Why are Properties in Macau so Expensive?

Sam Lee

We often find clients arriving from overseas are absolutely shocked at the property prices in Macau.

A look of disbelief is often followed by a phrase like “I could buy a mansion back home with that money!”

Although our Hong Kong cousin over the pond gets most of the limelight for ranking as the most expensive real estate market in the world for seven years in a row (by the Demographia International Housing Affordability Survey), Macau’s property prices are still astronomical relative to most foreign markets. The question is – “Why?”

The most obvious answer is pure supply and demand. Macau is a very small place filled with a lot of people. According to DSEC, Macau’s population was around 653,000 at end-2017, all squeezed into an area of about 30.5 km2.

To add to this, developable land is further limited by two major factors.

Firstly, large areas around the island of Coloane are protected by the government and cannot be developed, at least for the time being.

Secondly, the government is making an effort to increase the stock of public housing, which further squeezes land space available to the private market and arguably puts more pressure on prices.

The few parcels of land that are available for development are sold to developers usually on a tender at soaring prices, which is also reflected in the individual pre-sales unit prices down the line. 

Another factor that cannot be ignored is the amount of speculative money that has come into the market.

To exemplify this phenomenon, on December 15, 2017 Chief Executive Fernando Chui Sai On announced that the government will introduce further cooling measures from tightening mortgages to possible new taxation standards for empty flats and homeowners with multiple flats.

The market’s response to this in general has been to buy now, not later.

The level of speculation is further spurred on by the expectation that the imminent opening of the Hong Kong-Zhuhai-Macau Bridge will further boost the market.

Although an infrastructural project of that scale will no doubt have an impact on the market, investors should be cautioned against over-optimism as the long-term effects are yet to be determined.

Although there are many more nuances and dimensions to the equation, Macau’s astronomical property prices can be boiled down to these factors – limited land, dense population, tightly controlled land development plans and ongoing speculation. Plus of course, a healthy number of wealthy residents willing to pay these prices!

Sam Lee is a marketing manager and property consultant at JML Property.

JML was established in 1994 and offers Investment Property & Homes. It specializes in managing properties for owners and investors, and providing attractive and comfortable homes for tenants.

www.JMLProperty.com

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