Real Estate Matters | What will influence Macau property prices in 2015? (cont.) [ This 2-part article explores the different factors that affecting the market ]

Juliet Risdon

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 weeks article we explored three of the factors that will influence property prices in 2015.
In the second part of this article we look at another four factors, and remind readers that Macau property prices are influenced by at least 7 variables and may potentially be affected by many more.
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;

China Government Policy
Macau to a very large extent relies on the visitor traffic and revenue from mainland China visitors.
If the China government restrict travel permits into Macau, gaming growth is adversely affected, and if policy is relaxed the numbers are affected in a positive manner.

General / Global Economy
As we witnessed first hand in 2008, the global economy can knock the wind out of the most aggressive property market in earth.
The banking industry is fundamental to the property market, and as banks tighten lending policies and investors stop making investments, the supply of capital dries up and affects the general sentiment.
Alternatively a buoyant economy provides growing confidence, and investors are eager to place funds where they see bigger returns.

Interest Rates
Interest rates have been at an all time low for a long time. It is easy to discount this phenomenon and forget that loans are susceptible to rate fluctuations.
As interest rates rise and fall, so do loan repayments, and a rise in rates of 1% will increase payments of a 20 year mortgage loan on $1,000,000 by just under $6,800 per year.
In a typical example, someone owing $3,000,000 on property with a 20 year mortgage would experience an increase in interest payments alone of over $80,000 per year if interest rates returned to a more historical average of 7% than the current level of 3%.

Purchasing & Lending Guidelines
In a combination of efforts between government and banks, guidelines on property loans and loan ratios make it easier or harder to speculate on property prices.
Simply put, it is easier to buy a property when the bank will loan you 90% of the property value than when they will only lend you 50%.
However, the obvious point here is that it only affects those people with limited cash reserves, allowing people who have an abundance of cash easier access to properties that may be on the market because of;
a) The decrease in competition / demand for property and
b) the corresponding difficulty of a person to obtain a loan they need even if they have the 50% of the purchase price at their disposal, but require the timely cooperation of the bank to be able to make a successful bid / purchase of the property.

In conclusion, it is no wonder that property value predictions are really for the brave hearted folks.
They have to be blessed with a crystal ball allowing them to see all of these factors with absolute clarity, as well as the required intellect or computerized models to run the corresponding equation that calculates the sum of all of these factors with a high degree of accuracy.
They might also try their hand at weather forecasting as we have yet to find anyone that can tell us with any degree of certainty whether it will rain tomorrow or not.

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