Real Estate Matters | What will influences Macau property prices in 2015 ? (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.

One of the obstacles in making accurate predications about the future is the number of variables involved.
The more variables there are, the more complex the equation. The more complex the equation, the higher the chance of inaccuracy.
Macau property prices are influenced by at least 7 variables and may potentially be affected by many more.
Prices are rarely affected by a single factor. When this does occasionally happen, it is the neutrality of the other factors that make it appear as though the single factor is the only thing that matters, when in reality all elements are still influencing the outcome, albeit in a neutral manner.
To paraphrase George Orwell; All factors are equal, but at any given time, some factors are more equal than others.
In no particular order;

Supply & Demand
The basic rule of economics with which we are all familiar, and certainly one of the biggest drivers of prices since 2004.
Over the last 10 years the population of Macau has grown by 30% from 460,000 to over 600,000 according to government statistics. However the number of occupied apartments over the same period has grown from 160,000 to 185,000, an increase of just over 15%.
The numbers themselves may not look dramatic in % terms, but when you consider the exponential problem of supply and demand, the enormity of the situation starts to hit home.
To illustrate the point; If there are 10 apartments available and 9 people looking for housing, it is a buyers / tenants market.
However, if there are 10 apartments available and 11 people looking for housing, the market swings in favour of the owners and prices start to rise.
The difference in this seemingly minor increase cannot be over emphasized.
Couple this with a mis-match of the new apartments being built versus what the market requires, and you have a full-scale war on your hands.

Gaming & Related Growth
As we are all aware, the continued expansion and growth of the Gaming sector is the fuel for the Macau economy.
If growth slows and related projects are delayed, budgets are cut and there are less new people arriving / requiring housing. Those that are here already are faced with tighter purses and less urgency.

Macau Government Policy
From time to time. The Macau government is under pressure to interfere in the free housing market.
They implement policies that may be designed to either slow down or speed up the housing market such as stamp duty hikes or the supply of low cost housing.
These attempts to influence the market rarely work out as planned, and often have an opposite effect. The big question here is; Why………..?
To use an analogy from the economic commentator Nassim Taleb, we can compare ‘cause and effect’ using the model of a ball in the game of snooker (or the game of ‘Pool’ works just as well if you are not familiar with snooker).
When you hit one ball against another, it is fairly easy to predict where that ball will go. But as the second ball hits more balls, and they in turn hit other balls, there are too many variables to be able to predict the outcome.
The variables do not simply include the speed and geometric angles, but they should also include the resistance of the cloth, air temperature, moisture, wind etc etc.
For example, policies designed to halt rising property values by increasing purchase taxes invariably have the desired effect in the short term, but at the same time they stop homebuyers and push them instead to become tenants in a rental market that is already vastly overheated.
As rental prices rise, it is not long before the cost of renting is high enough to warrant purchasing instead, and sale prices start to rise again.

Next Week: 4 More factors that will influence what you pay for your apartment in 2015
For further information on leasing or buying property please call me or visit our website Www.JMLProperty.com, or e-mail me on Juliet@JMLProperty.com we are always happy to give you our opinion and experience whenever we can help.

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