Courtesy Macau Business Posted: 5/27/2010 10:27:01 AM

Public tenders and the revitalisation of industrial land is the way forward for social homes

The government is poised to promote the provision of land by public tender and the revitalization of industrial buildings in a bid to increase the number of small and medium size housing units.
The Secretary for Transport and Public Works, Lau Si Io, says plans for implementing these measures have already been defined.
It is expected that an experimental total area of 30,000 square feet will be set aside for their construction.
Strict rules will be imposed to ensure that the original intentions of the plan are followed, says the Office of the Secretary for Transport and Public Works.
With this initiative Lau believes more than 500 economic homes can be built on one plot of land.
“After this measure is implemented, according to market reactions, we will study and analyse the results to deem whether or not to continue,” the office said.
As for the revitalization of industrial buildings, Lau said this  was part of the governing policies guidelines for this year.
The measure will first encompass cases where rebuilding will be done from scratch. The remaining cases where the revitalization of industrial buildings is requested will be studied later.
In the meantime, far, it has already received several requests to change the original purpose of some buildings, all of which pertain to singular properties.
At present, the government is also preparing measures to encourage and simplify the procedures to guide developers to build housing units of small and medium size.

http://www.macaubusiness.com/news/industrial-revolution/3051/

Courtesy Macau Business: Posted: 5/27/2010 10:41:08 AM

After announcing relatively healthy 2009 profit results, the Shun Tak Group has welcomed moves for more regulation of the property market, but only if the rules are given time to bed down

More regulation will be good for Macau’s housing market says the Shun Tak Group.
Group sales director Warren Leung Cheuk Hang says the market is self-disciplined and consistently healthy and should be given more time to reach maturity.
Meanwhile, one of Hong Kong’s major real estate agencies says that constraints imposed on speculation in the mainland market may lead to an influx of capital to buy homes in Macau.

Nine rules
Last month, the Hong Kong government announced “nine rules” to encourage disclosures by property developers in their sales brochures, including the display of a non-furnished showflat, minimum thresholds for first-price lists and clear disclosure of a property’s location.
It even threatened a maximum stamp duty tax if speculation spread to the cheaper apartments.
Shun Tak Holdings sales director, Warren Leung Cheuk Hang, says the company will comply with the Hong Kong guidelines, but noted that buyers from Hong Kong have learned their lesson and are better informed.
The most successful real estate salesperson in Hong Kong, who once worked for the powerful developer Cheung Kong, notes that the local market is in good health, even with little regulation.
“There have been no major complaints of misleading information supplied by agencies or real estate promoters. Transparency is good and, even without the legal obligation, developers often disclose all areas clearly in their catalogues,” says Leung.
He does however defend more regulation by the government provided that sufficient time is provided for the rules to take shape.
“Within three to eight years, I believe that [the housing market] is going to be, I will not say more tightly regulated, but more mature in terms of its supporting infrastructure,” he predicts.

A great treasure
Comparing Macau in 2010 with Hong Kong in the 1980s, he says a sign of maturity is the familiarity with mortgages, which is a present reality in the Macau market.
“Macau is actually a great treasure. Of all the apartments’ proprietors, 77 percent are free of mortgage and the ‘cash flow’ is huge. This explains why even projects due for completion in three years can sell quickly,” says Leung.
He forecasts a minimum rise of 10 percent in prices and an increase of 30 percent in transactions this year, while underscoring the rise in property values is a long-term trend and that “there is no bubble in the market”.

Brakes on speculation
And at a time when the mainland is putting the brakes on market speculation, Stanley Poon, director of Centaline (Macau), believes that investors will bring money to Macau and Hong Kong, looking for opportunities, though the difference may not be obvious since  non-Macau buyers are responsible for only 10 to 12 percent of all transactions.
Poon disagrees with the idea that some local buyers are only “professionals” at the call of capital from the mainland, saying locals have strong purchasing power.
The Hong Kong-headquartered agency recently opened a branch in Macau–with another to follow soon– and hopes to raise MOP80 million in commissions during 2010.Shun Tak will be the sales representative for the Sociedade de Turismo e Diversões de Macau (STDM) apartment building in front of Wynn Macau and Hotel Lisboa.
Details will be unveiled within a week or two and prices will be slightly below those of the luxury apartments at One Central Residences.

Less revenue, more profit

Shun Tak Holdings’ full year profits for 2009 amounted to HK$1.19 billion (MOP1.2 billion), excluding the revaluation surplus on investment properties and net gains on the sale of its share in the Mandarin Oriental hotel.
However, the company’s revenue fell from HK$4.47 billion (MOP4.52 billion) in 2008 to HK$3.33 billion (MOP3.36 billion) in 2009.
The outlook for the Westin resort was “challenging” and the volume of TurboJet passengers suffered a slide of 17 percent due to a slump in the tourist market.
With the economy recovering and business to expand, Shun Tak also highlighted the “sumptuous and contemporary” columbarium project in Taipa.
With completion scheduled for the second quarter of 2011, the company expects it to attract significant interest.

http://www.macaubusiness.com/news/house-rules/3054/

 2009 China Real Estate (Macau) Forum and International Financing & Investment Fair(CREMF 2009), which is organized by China Real Estate Association (CREA), Real Estate Association of Guangdong Province (GREA) andMacau Real Estate Development Chamber of Commerce (ACFPM), following the guidence of The Ministry of Housing and Urban-Rural Development of People’s Republic of China and the Secretariat for Economy and Finance of Macao Special Administrative Region, under special support of International Real Estate Federation (FIABCI) and China Real Estate Research Association (CRERA) , will be grandly opened at 11:00 am on September 11, 2009 in Macau Tower.

 The forum is in full swing to establish a co-operation platform of real estate for the Cross Strait 4 Regions, at the same time, the real estate practitioners from all over the world will be invited to participate in a wide range. We are looking forward to integrating the cooperation of the Cross Strait 4 Regions into the international level in line with international standards and giving full play to Macao’s role of platform for Portuguese-speaking world and role of bridge for Chinese business men in the world. The Forum will invite relevant government officials from home and abroad, government leaders of Macao Special Administrative Region, officials in charge of the Liaison Office of the Central People’s Government in the Macau Special Administrative Region, persons responsible for Realty World Alliance and leaders of Chinese Real Estate Association as officiating guests for the Opening Ceremony. All the speakers of the Forum are authoritative research experts and representative industrial leaders of real estate from home and abroad. We believe that through extensive and interactive communication, real estate industry will grasp new opportunities under the new global situation, meet the challenges and achieve a new peak.

        The CREMF 2009 is composed of Grand Opening Ceremony, International Real Estate Summit, Sub-ofrums and Financing & Investment Fair, lasing two days. On basis of the theme that “New Development of Real Estate Market after Financing Crisis”, the forums will be circling hot topics as follows: 1. the coordinated development and regulatory of the real estate market; 2. Development Prospects of the tourism real estate market; 3. Development trends and risk avoidance in financing and investment of real estate enterprises; 4. Interactive relationship between adoption of new environmental protection technologies and sales of real estate and 5. Opportunities of cluster development for upstream and downstream industries related to real estate. More than one thousand guests will attend to the CREMF 2009.

        The CREMF 2009 will be the first International Grand Forum for real estate since Macau became a city. The Forum will be surely upgrade international impression of Macau, and play an important role in enhancing Macau’s furtherly internationalization.

        2009 Macau Real Estate EXPO will be held in the same period.

        To couple with 2009 China Real Estate (Macau) Forum and International Financing & Investment Fair(CREMF 2009), to further facilitate communication and cooperation among real estate industries from Taiwan, Hong Kong and Macau and enhance healthy and continuous development of Macau real estate industry, under support of China Real Estate Association (CREA) and Real Estate Association of Guangdong Province, Macau Real Estate Development Chamber of Commerce (ACFPM), associating with Zhuhai Real Estate Association, Hong Kong Association for the Advancement of Real Estate and Construction Technology Limited and Cross-strait China and International Real Estate Economic and Trade Transaction and Promotion Association of Taiwan, organizes 2009 Macau Real Estate EXPO. The EXPO will be held during September 11th to 13th at 2nd Floor Hall of Macau Tower. The Opening Ceremony will be held at 12:00 on September 11th.

        The EXPO will exhibit brand-new impression and selling bright spot of real estate enterprises and relevant finance, the service sectors of the four areas cross-strait. Through observation and learning from each other, all of them will extend their advantages, broaden the international perspective, strengthen the market context, promote regional cooperation, trigger selling hot and enhance development of exhibition industry in Macau. Real estate investors, major intermediary businesses, financial firms, building materials and environmental protection enterprises and relevant upstream and downstream service industries will be invited to make exhibition on the EXPO.

        Public Opening time of the EXPO will be ：September 11：12:00-19:00； September 12：9:30-19:00；September 13： 9:30-18:00.

According to a recent announcement by the Lands, Public Works and Transport Bureau (DSSOPT), more than 30,000 residential apartments are currently under construction or planned for construction. Some property industry insiders believe that completing these apartments in five years – 6,000 per year - is appropriate and will not lead to a decrease in property prices. Others, however, believe that prices depend on the forthcoming population policy. Since construction projects like the Hong Kong-Zhuhai-Macao Bridge and the Light Railway System are slated for launch by the end of the year it is anticipated that the demand for migrant labour will increase, thus benefiting the leasing market.

However, Chong Sio Kin, President of the Macau General Association of Real Estate remarks that even though building plans are already approved by the authorities developers will wait and see how the economic situation unfolds before committing themselves to construction projects, and believes the economic downturn may delay some projects. It is likely, therefore, that not all of the 30,000 apartments will be put on the market in the next few years. The increasing supply of new apartments has an indirect impact on property prices, yet there are still many other factors affecting prices, such as population policy and population status. If the government revives the quality migrant admission scheme or Investment Immigration Policy, then property prices will have firm ground to stand on.

Centaline (Macau) Property Agency Executive Director Kwok Chiu Lung said the government’s conservative processing of construction project applications has slowed the output of residential apartments on the market. He estimates that the market will see the appearance of an average four or five thousand new apartments every year, which is within expectations and will not dramatically cool property prices. As the supply of residential apartments is growing, potential demand will increase accordingly. In fact, there are many potential middle-class buyers with strong purchasing power who are living in older districts who have put aside plans to buy a new home as property prices remain high. As the purchasing power of these potential buyers becomes stronger and their desire for a new home even greater, it is believed that they will be able to ‘digest’ the new apartments to be marketed.

In addition, construction projects related to the Hong Kong-Zhuhai-Macao Bridge and the Light Railway System, which are planned to kick off by the end of this year, will require a great amount of imported labour, leading to an increase in the number of imported workers. Apartment owners who can afford to make a long-term investment will wait for the right time to lease their properties.
 

According to Macao Daily News, a couple teaching at a university is suspected of selling a MOP5 million luxury flat and two car parks located at Rua de Nam King in Taipa to two buyers at the same time, receiving deposits totalling MOP1.8 million.  Similar cases periodically happen in Macao as no comprehensive measures are in place to curb such practices. Property agents can only make judgments based on their experience and interpersonal network in circumstances like this. The real estate sector believes, therefore, that it is time to review and improve the property transaction law.

At present, when an agent deals with a firsthand property sale, he will first approach the Housing Bureau to check if the name of the property owner has changed. For secondary market property, he will check whether it is vacant or has been consigned for sale in order to prevent falling into a trap whereby the property has been sold to several buyers. If the seller intends to cheat, agents can only maintain high vigilance and be sensitive to the situation to prevent such incidents. In this case, the buyer was required to make a large deposit and it was this that alerted the broker as under normal circumstances only 10% of the property price is paid as deposit. One should be more vigilant if the owner claims that he needs to cash out his property immediately and requests an early settlement of the deposit.

A property re-consigned for sale can usually be advertised through the newspapers or property agents. If the agents are paying close attention to market conditions, they will know whether the property has been consigned for sale earlier; and if they have built up a good interpersonal relationship they can consult fellow agents to ascertain if anything is amiss with the property in order to reduce the frequency of similar cases.

Currently, the registration of a property owner can be checked at the Housing Bureau. Although property registration is protected by law there are still many loopholes in the existing legislation. At the end of the day, there is no way to avoid being cheated if the seller intends to do so. In a property transaction, the buyer usually pays the stamp duty and registers the property after the deed is made. Even if the deposit has been settled, the property will not be registered. Therefore, one can hardly be aware that the property has been simultaneously sold to several buyers.

It is believed that there is a necessity for the revision and improvement of the current law. In Hong Kong, both the seller and buyer are required to hire solicitors to witness the transaction process; these solicitors act in opposing positions on behalf of their respective client and are responsible for any problem or omission detected in the transaction process. As they stand in ‘opposing’ corners, the seller and buyer is well protected. Hence, there are fewer cases of property being sold to several buyers at the same time in Hong Kong compared to Macao, where only one lawyer is required to act on behalf of both parties.

The Housing Bureau has recently put forward a provisional scheme to subsidise the maintenance of public facilities of low-rise buildings. The scheme is only applicable to buildings whose maximum number of storeys is seven and whose minimum age is 30 years. Applications can be filed by either a proprietor who presents a letter of consent with the signatures of over 50% of the building’s owners, the management committee elected through a legal procedure or the concerned property management. Subsidies will cover the fee for the upkeep or replacement of the main gate, general power and water supply facilities and sewage facilities. The subsidies for each building will not exceed MOP110,000. The Building Maintenance Fund will grant the subsidies and the scheme will run for one year.

To qualify for the subsidy scheme, properties must be registered as residential or commercial buildings with the Commercial Registry. The maximum subsidised amount for the main gates, power facilities, water facilities and sewage facilities will be MOP15,000, MOP40,000, MOP40,000 and MOP15,000 respectively. Subsidy applications for the same items cannot be made within one year upon commencement of the scheme. In addition, the subsidy application must be submitted to the Housing Bureau within one year upon commencement of the scheme and prior to the commencement of works.

The Administration Committee of the Housing Repair and Maintenance Fund of the Housing Bureau will be responsible for the examination and approval of applications. Approvals of applications will be based on the financial status of the Housing Repair and Maintenance Fund. Applicants can choose to receive a one-off subsidy or subsidies by instalments. Relevant contractors are required, upon completion of relevant works, to submit certificates of works completion and relevant expenditure chits. Subsidies will only be granted when the examination and approval processes are completed.

For details of the subsidy scheme, residents are invited to contact the Housing Bureau on hotline 2859 4875 or visit its website at http://www.ihm.gov.mo.

Globally, there are more than 1.57 billion Internet users. Macao’s Internet Utility report says that as at the end of 2008 Macao’s Internet usage achieved 66% penetration of the population, which translates into 330,000 subscribers, 95% of whom use broadband connection facilities. According to an expert, the Internet coverage rate of Macao ranks number one in the world.

The report also summarises the features of Macao’s Internet use. The most popular activities among Internet users are reading online news, searching for information and checking emails. Less time is spent on downloading or watching films. Most non-users of the Internet said that they do not use it because they do not know how, have no time, do not have a computer or related facilities, or are not interested. Internet users spend an average 138 minutes on a daily basis on browsing websites, thus it is evident that the Internet has become an integral part of everyday human life.

Online Property Search in Vogue
According to statistics from the website vproperty.mo, a rise of 40% in the number of online property searches has been recorded in February 2009 showing an increase in the number of people re entering the property market. 70% of which target apartments below MOP 2.5 million and between 3-15 years old. Due to the fall in rental prices, renting has become more attractive, a proposition supported by the 20% increase in searches on vproperty.mo.

A local resident Mr. Wong said that he prefers to search for apartments online, pointing out that property prices fluctuate and that deals are closed relatively quickly: as information on the Internet is more timely and current, he can source the latest news immediately. Another Internet user, Mr. Lei, said that online information about property sales is more complete and searchers may browse several properties for sale or rent at the same time. With the images provided, they can save a lot of time compared with making personal visits via an agent as in the past.

With regard to the bill lowering the transaction tax - which has been sent to the Legislative Assembly for passage - real estate associations and chambers of commerce recently said that government policies should be people-oriented, with all of them expressing the desire for a standard tax rate. They further suggest that a nominal charge of MOP100 should be applied to properties worth less than $2m. to help lower income homebuyers.

The property transaction tax currently levied in Mainland China and Hong Kong is relatively lower than that of Macao. In China, the tax rate for low and medium-priced properties of less than 144 m² is 1.5% while high-priced properties larger than 144 m² are levied at 3% of the property price. In Hong Kong, the tax rate for properties valued at less than HK$3m. is 1.5%, 3% for those below HK$6m., and only 3.75% for properties above HK$6.72m. A nominal HK$100 is charged for properties valued at less than HK$2 million.

Chong Sio Kin, President of Macau General Association of Real Estate, expressed his support for the government’s plan to implement a standard stamp duty of 1%, which should help people with a lower income own flats. He further suggests a nominal charge of MOP100 for properties priced less than MOP2 million.

Macao’s homebuyers currently have to pay five different types of tax in a property transaction (i.e.) transaction tax, stamp duty, notarisation fee, registration fee and mortgage registration fee. By adding up these complex figures, the total tax rate amounts to 4.95%, which is higher and more complicated than the standard rate of tax of 1.5% in Mainland China and Hong Kong.

Ng Lee Fan, President of the Association of Real Estate Development of Macau, believes that a nominal charge of between MOP100-150 should be applied to property transactions of less than MOP2m., while the tax rate for property transactions exceeding MOP2 m. should be lowered to 1%. He also believes that the preferential tax rate scheme would indeed help revitalise the real estate market. He further suggests that the government combine transaction, notarisation, registration and mortgage registration fees into a single charge adjusted to 0.5% of the transaction price so that property investment can be relieved of high taxes.

Ung Choi Kun, Standing Vice-President of the Association of Property Agents and Realty Developers of Macau, believes that homebuyers in Macao are still burdened with complicated procedures and expensive notarisation and mortgage registration fees. He thinks that the relevant departments should keep pace with the times and be in tune with government policies to lower, simplify and devise a standard and reasonable tax rate in order to achieve the goal of people-orientation.

Housing Bureau Director Chiang Coc Meng recently revealed that the Macao SAR Government and the original lessee of Bairro da Ilha Verde have reached an agreement regarding public housing project plot 4 in the area, which is earmarked to provide 500 apartments.
Construction will begin this year. The lessee has also agreed to finalise the clearance of plots 1 to 3 by 2010 and return them to the Government for public housing development.

Furthermore, the Government has also reserved twelve plots in Seac Pai Van in Coloane for public housing. The location was originally a quarry; the nearby traffic network and infrastructure are currently inadequate, and inappropriate for immediate use. The government is currently drafting a related urban plan incorporating traffic network and infrastructure with a view to early construction.

As far as the Temporary Subsidy Plan for Public Housing Applicants is concerned, as of December 2008, some 2,495 application forms have been submitted for the 6,199 units available, of which 2,341 forms have been processed. A total of 2,055 applications were approved while 286 were rejected. Six applicants have voluntarily forfeited the subsidy or withdrawn their application and 128 are pending supplementary documentation, while 20 are pending processing. For those not qualified to apply for public housing, but fulfil income requirements, the Welfare Bureau will extend assistance if they are unable to pay rent charges.

The government has also reserved a plot in the former Mong Há Barracks on Rua de Francisco Xavier Pereira, allotting an area of 2200m² for a public housing scheme. At the same time, the government will speed up the legal amendments pertaining to public housing to ensure the proper use of resources.

In a 2008 Macau real estate market review, Jones Lang LaSalle stated that the transactions of stores and commercial properties are affected by the financial crisis and expects rental prices to decline by over 10% this year.

The first three quarters of 2008 registered an increase in both the sale prices and rental prices of stores. The financial crisis took its toll in Q4, however, forcing them to fall by 11.8% and 4.6%, respectively. While overall capital values of stores declined by 1.6%, rental prices nevertheless registered a 5.8% growth in 2008.

According to Jones Lang LaSalle, with some retailers putting expansion plans on hold or even scaling down their businesses, rental prices for stores are likely to plunge 15-20%, with sale prices dropping more than 20% this year. Nevertheless, thanks to the suspension of a few major projects, average rentals might pick up a little.

The sale prices and rental prices of Macau commercial properties saw a 16.9% and 4.2% decrease, respectively, in Q4 2008 subsequent to successive growth in the first three quarters of the year, contributing to a 2.6% and a 1.1% annual drop in stated prices.

Jones Lang LaSalle envisages that scaling down businesses or downsizing is likely to take place in some local companies amid the ongoing financial crisis, which the company believes will dampen demand for commercial property and lead to increased vacancies. Under such circumstances, the rental and sale prices of commercial properties in Macau are likely to decline by 10-15% and 10%, respectively, this year.

Related Topics:
All Posts - Macau Property News

Simon Henry, CEO of vproperty.mo, maintains that since the Macao property market is relatively nimble the speed with which it recovers may be faster than that of neighbouring regions. He thinks that subsequent to the recent property price slump there is not much room left for further decline and that property prices in Macao have just about hit rock bottom. Residents are currently waiting for specific measures to be taken after the Chinese New Year before they actually commit to purchasing so transaction numbers have fallen rather than risen, while the number of property surveys increases. He anticipates that after the expected policies are announced, mid-priced property sales will start to pick up in June, spurred by favourable news. However, before bad news is a thing of the past the market will not change too much, with the next three months crucial in whether investors will enter the market or not.

It is estimated that prior to the financial crisis investors and end-users each comprised half the number of property buyers, whereas currently end-users make up 80% and investors just 20%. It is anticipated, therefore, that there will be healthy transactions in low and mid-priced properties in 2009. Meanwhile, several casinos have laid off staff due to the financial crisis and as a result some of their workforce have departed Macao. Hence, the property rental market is in a situation where supply exceeds demand, with much pressure for rental prices to drop by an anticipated 20-30%.

He further points out that generally the end of the year is a particularly active time for launching new properties. While Macao has been left relatively intact by the economic crisis in 2008, developers have tended to delay the launch of new properties, which in turn will increase the number of new properties in stock. Simon Henry is optimistic about the Macao economy in the future and thinks that as long as overseas investors see signs of value emerge in Macao they will re-enter the market, with prices of high-end properties following suit. He therefore sees the period between now and June as the best time for property purchase, whereas after June it would be a good time to sell.

The year 2008 is bound to leave an indelible mark on the history of real estate in Macao. When many a developer was still submerged in the glamorous profits reaped in ‘heady’ 2007, a ‘tremendous change’ befell the market in 2008. Where is the property market heading in 2009?

2008 Property Market Review
On the threshold of Lunar New Year 2008, two residential plots of land in Far Chee Kee were sold at 10-fold and nearly 9-fold prices, respectively, which immediately spurred property prices in the district by another 5%-10%. Many owners even put their property for sale on hold or entertained no negotiation on price during the Chinese Spring Festival. The government offered several favourable incentives such as property tax relief policies, and the expected Hong Kong-Zhuhai-Macao Bridge project was officially decided upon, while interest rates were continuously cut to counter rising inflation. These factors attracted throngs of investors to the property market, who sought to buy Macao properties to hedge against asset losses. Such bullish incentives and a booming gaming sector injected Macao’s property market with unprecedented fever, with dealers estimating that property transaction numbers and values would rise by an average of 15% in 2008.

Macao Property Market Rides Financial Tsunami
As fate would have it, dramatic changes always occur when it seems most unlikely. By mid-September 2008, Lehman Brothers, the fourth largest US investment bank, announced bankruptcy, which was as good as dropping a bomb on the global financial market and resulted in a ‘financial tsunami’ that engulfed the globe. No market was left intact, be it stock, bond or real estate, without exception.

As a result, US stocks plunged 504 points, its steepest drop since 2001. Asian stocks in Japan and Hong Kong also suffered their biggest plunge in 2008 as evidence mounted that the global economy was sliding into depression. Wong Chun-lam, Executive Director of Ricacorp (Macau) Properties Ltd, points out that Macao is always affected by the global economy and is closely influenced by the Hong Kong stock market since equity funds can flow into the property market at any time. It was the ‘financial tsunami’ that dragged Macao’s economy down this time, and the property market in particular.

Transaction numbers and turnover fall in tandem in October
Wong says in his summary of Macao’s property market in 2008 that the number of property transactions in the first quarter of 2008 was slightly less than that of the last quarter of 2007 but with a higher turnover. By the second quarter, the number of transactions shrank slightly due to global bearish sentiment plus policy measures taken to curb the gaming sector and individual visitors from the Mainland. Property prices, however, did not fall by much. Thereafter, both the turnover and number of transactions in the property market went sideways. Macao’s property market was not depressed until the Lehman Brothers bankruptcy. In October, the number of property transactions hit bottom, recording just 300 sales for the month.

According to government statistics, some 21,628 property transactions occurred in 2007. By October 2008, that number had fallen to 11,424 at an estimated 12,000 transactions for the whole year, a drop of more than 40% compared to the previous year. In terms of business value, property transactions in 2007 amounted to MOP42 billion. By the third quarter of 2008 that number had dropped to MOP26 billion. It is estimated that volume will fall by more than 30%, while price per square foot is also estimated to decline by 30%.

Wong points out that many property buyers are foreign investors, of which nearly 20% are from Hong Kong. During the ‘financial tsunami’ many of them lost money in the stock market and were eager to sell their property to cover their losses, which in turn resulted in the steep decline of property prices. In addition, gaming operators are beginning to cut wages and lay off workers, further dampening market mood. All of these factors made Macao’s property market fall steeper than surrounding regions; Hong Kong’s property market, for example, has fallen by about 30% while Macao’s has dived by more than 40%. Property projects still under construction are under the most pressure, suffering a fall of some 50%.

Prices are nearing the bottom, with limited room for further cuts
According to unofficial statistics, half of property purchasers were investors before the ‘financial tsunami’. Currently, 80% are homebuyers while investors account for just 20%. Wong Chun-lam thinks that with first-hand transaction prices having fallen to that of late 2005 and early 2006, it is apparent that prices are down to a reasonable level. However, Macao’s economic landscape has changed, with new players such as Wynn, Crown and The Venetian active in the territory. The panic of October and November in the wake of the ‘financial tsunami’ has subsided, and prices are nearing the bottom, with limited room for further cuts. Besides, affected by the sub-prime crisis and resulting financial fallout from the US, investors have less confidence even if they still make profits in the financial market. Currently, interest rates on bank deposits have fallen to practically zero, and buying foreign currency means risking devaluation. Consequently, investing in the property market is a better choice, since at least it will ensure 2% to 3% rental return, while the property itself may go up in price. Investors, he maintains, are more likely to enter the property market in 2009.

He expects transactions will pick up when the government implements its 4% home buying interest subsidy, and the reduction or exemption of property transfer tax. To celebrate the 10th anniversary of the Macao SAR in 2009, he adds, the Central Government may issue a series of favourable measures, which would stimulate the property market; thus, the outlook for the property market in 2009 is optimistic.

Without positive news, high-end property prices may fall further
Chong Sio Kin, President of the Macau General Association of Real Estate, says that residents would rather wait until specific measures are implemented after the Chinese New Year. The number of transactions, therefore, is falling rather than rising. He estimates that after new policies are in place, the property market could bounce back around June, with medium-priced properties rallying. At present, however, while some high-end properties have fallen in price by 50%, they are subject to further decline because of the lack of positive news. It is believed that high-end property prices will rebound if the influence of the financial turmoil dissipates by the second half of 2009, when he believes the overall economy will pick up.

Macao’s property market may conclude by the end of next year
The adjustment of Macao’s property market may conclude by the end of next year, believes Cheong Iat Fai, CEO of Midland Macau; as Macao is relatively nimble in size its property market is likely to recover faster than that of Hong Kong, Singapore, and other places. He believes that the current adjustment will end as early as the end of next year and that there is not much room for further price cuts because of the previous slump. The property market will neither rise nor fall before the negative news disappears. Investors will not enter the market until there are signs of it picking up. The recent signing of eight agreements at the 2008 Guangdong-Macao Joint Co-operation Conference - in which Guangdong and Macao agreed to co-operate in the building of the Hong Kong-Zhuhai-Macao Bridge and the development of Hengqin Island - will have a positive effect on Macao’s property market, he says; however, it is not yet time to boost the market by publicising these factors, which can be made use of at a later date. He is optimistic about Macao’s economy, and believes that investors will return to Macao’s property market when positive figures gradually emerge and as investors begin to recognise value in investing in the local property market.

Property markets all over the world have suffered a downturn in the wake of continuously bad new about the economy, and the property market in Macau has not gone unscathed. According to Centaline (Macau) Property Agency Executive Director Kwok Chiu Lung, property prices have fallen 50% this year, prompting the government to announce several new policies to help citizens buy a home. If no more bad news emerges from the US economy, the property market is likely to stabilise in the first half of next year, with property prices possibly rising again in the second half. He thinks it advisable for the government to seek ways to ensure that every citizen is able to avail him or herself once in his or her lifetime to the recently resumed 4% home buying interest rate subsidy.

He says that in response to the sluggish property market the government has launched several schemes to help people buy, which is good for the property market. There are signs that property transactions are gradually picking up. November volume increased 30% on that of October, which was the worst month. The number of property transactions has risen from 250 to 300 since early December.

While many investors have lost money on their property deals, most current purchases are made by homebuyers, while there are still potential buyers waiting for property prices to hit bottom. Kwok maintains prices are approaching the bottom, although they may not have reached it yet; nevertheless, the risk in buying property is now greatly reduced compared to when the market was at its peak. Now that property prices have fallen 50%, a further fall of 20%, even if likely, would not be as inviting a proposition. It is believed that homebuyers will purchase by taking advantage of the government’s favourable policies. Kwok believes that the worst of the property market downturn is over and says that it is now advisable for people to buy. 

Sam Wo Property Agency Ltd.
inspections:5745

Macau New Lucky Company Ltd
inspections:5045

Ricacorp (Macau) Properties Limited
inspections: 3593

The government recently announced that the 4% Interest Rate Subsidy Scheme would be resumed early in 2009 for permanent residents buying their first home priced at MOP3 million or less. Homebuyers may concurrently apply for the government’s 20% guarantee for a mortgage loan, provided that the buyer makes at least 10% down payment for the purchase, and that the mortgage loan guaranteed by the government does not exceed 20% of the property’s purchase price.

In addition, the government is going to present a motion to the Legislative Assembly that it continue to exempt property transfer stamp duty on properties of up to MOP3 million on the first residential property transfer deal, and a decrease of stamp duty to 1% for other real estate transactions, and that these initiatives be incorporated into the tax regime on a long term basis. Chief Executive Edmund Ho made it clear that the previous Investment Immigration Scheme would not be resumed in the near future; instead, the above-proposed measures may help enable residential properties to become affordable to young and middle-class citizens, thereby relieving pressure on demands for public housing as well as reviving the stagnant property market.

The property industry feels confident that the government’s new subsidy schemes, with the return of property prices to a reasonable level, will stimulate property transactions and eventually revive the property market. It is believed Macao’s property market will not go into an irreversible decline. As current property prices have returned to a reasonable level, it is obviously a favourable time for home buying. 

Secretary for Transport and Public Works (SOPT) Lau Si Io said that the government is not only going to implement the first-phase construction project of 7,000 public residential units by the end of this year but will also endeavour to increase the number of public houses and land reserve at its disposal through land exchange and the reconstruction of old communities with low housing density. In addition to ensuring that by the end of 2010 some 19,000 public residences will be available, the government has plans for an additional 4,000 public residences to be built. The secretary emphasised, however, that the government is not going to provide all available land for a one-off development of public housing just to meet housing demand. This seems to be confirmed by the latest figures indicating that some of the applicants for public housing are less eager to buy their own properties while others are disqualified by failing to meet eligibility conditions. In addition, the downturn in property prices and the withdrawal of migrant workers has helped depress housing demand.

Some 11,000 housing units are under construction, in addition to the existing 10,000 apartments awaiting buyers. Some 70% of unsold flats are second-hand units measuring less than 1,000sq.ft, which could conceivably be bought by public housing applicants. However, more than 80% of apartments currently under construction are larger than 1,000sq.ft, and are obviously unaffordable to public housing applicants, thus a gap between demand and supply for public housing remains. Consequently, the government should adjust its public housing policy from time to time in line with social and economic development and the status of the property market, as well as take into account residents’ actual needs. The government should flexibly tune its public house programme to meet and stabilise residents’ housing needs to ensure that public housing resources are put to good use in the long term.     

TRANSACTION OF BUILDING UNITS AS PER RECORD OF STAMP DUTY

Sale and purchase of building units with stamp duty paid for the third quarter of 2008 dropped significantly by 42.4% quarter-to-quarter to 4,229, and the total value amounted to MOP7.07 billion,down by 35.7%. Among these units, 51.7% (2,188 units valued at MOP5.04 billion) were new unitsd that were within the property tax exemption period.The majority (2,335 units valued at MOP5.86 billion) of these transactions were residential units that accounted for 55.2% of the total number of building units; the number of residential units and value decreased by 42.7% and 36.3% respectively over the preceding quarter. In addition, there were 288commercial units, 148 offices and 37 industrial units. Among these residential units, 1,976 units were situated in the Macao Peninsula, 346 in Taipa and 13 in Coloane. Analysed by transaction price, number of residential units sold for over MOP4,000,000 totalled 522 (22.4% of the total); 402 units (17.2%) for over MOP2,000,000 to MOP4,000,000; 558 units (23.9%) for over MOP1,000,000 to MOP2,000,000; and 853 units (36.5%) for MOP1,000,000 or less.

In the third quarter of 2008, 1,980 units (46.8% of the total) were purchased and sold under Intermediate Transfer of Title with a total value of MOP4.66 billion, down by 37.1% and 32.9% over the previous quarter. The majority of the units were situated at the districts of NATAP and Horta e Costa e Ouvidor Arriaga, sharing 48.5% and 36.3%, respectively.

Average transaction price of residential units in selected districts

                                                                                                                                    MOP/m2

In the third quarter of 2008, the overall average transaction price of residential units amounted to MOP23,819 per square meter of usable area, down by 3.7% quarter-to-quarter. The average transaction price of those in Taipa decreased by 6.2% to MOP22,085 per square meter, and the average price of those in the Macao Peninsula fell by 5.1% to MOP23,911 per square meter.

**Data provided by DSEC

Average Price of Sought-After Residences in Macau

Average Price of Sought-After Residences in Taipa

**prices in Hong Kong dollars

 Price Comparison of Selected Macau Residences: 2007 vs. 2008

Statistics by vproperty.mo (computed and recorded per transaction by Centaline (Macau) for reference only)

more than 1000 active members
 
Total active listing: 4185
Total condo: 3648
Total serviced apartment: 4
Total villa: 24
Total office: 106
Total shop: 214
Total industrial: 13
Total parking space: 180

representing 60% of the Macau property market

Square foot Prices of Selected Luxury Properties in Macao

While One Central sold at MOP$8,000/feet2 when the property market was high, its prices have dropped 50% and units are now available at about MOP$4,000/feet2. Some property dealers point out, however, that since the said property has a relatively long completion period, during which time its price has risen substantially, investors who do not wish to own the property can sell before the completion of the property at a price that puts them on the positive side of the deal, thus aggravating the fall in prices. These are believed to be isolated cases that do not trigger a chain effect. However, some agents claim that since the prices of One Central - the benchmark for the high-end property market - has halved, other properties will inevitably follow suit.

According to Cheong Iat Fai, CEO of Midland Macau, although the square foot price of One Central has fallen back to its initial level of late 2005 this is merely an individual incident and does not properly reflect the status quo of the luxury property market.

Ku Ga Hou, President and General Manager of Jones Lang LaSalle Macau, points out that apart from Blocks IV and VI, which have been purchased wholesale by certain funds, the remaining five blocks of One Central are all available for retail sale. Given that the initial square foot price was MOP$4,200-4,300, if a property is sold at MOP$4,500/feet2 now it still enters positive territory. Those buyers who are worried about market prospects and do not want to own the property may wish to sell and leave the market.

According to Cheong Iat Fai, One Central has attracted numerous foreign owners who may well sell their overseas properties such as those in One Central in the economic downturn. Moreover, since there is still one year to go before the property is completed investors who do not wish to own under current economic conditions are likely to sell their property at a low price as long as it does not incur a loss. Since One Central has a longer than normal construction period, and with prices having risen substantially over the past two years, even if investors sell at about MOP$4,000/feet2, they may still make a little profit or leave the market unscathed.

(1)HM-Property Investment Ltd
Number of online inspections:6,557

(2)Century 21 Shui Hong Property
Number of online inspections:4611

(3)Sam Wo Property Agency Ltd.
Number of online inspections:3999

(1)Century 21 Shui Hong Property
Telephone enquiries:271

(2)Great and Far Realty Consultant
Telephone enquiries: 264

(3)HM-Property Investment Ltd
Telephone enquiries:241

The sluggish property market has been evident for some time, with only 500 transactions completed in September and October. It is getting worse – with increasing redundancies and closures of real estate companies. In view of the downturn, the Association of Real Estate Agents hopes that the Mainland will loosen visa restrictions so that Macao can be treated on an equal footing with Hong Kong, and that the Macao government will review its immigration regulations regarding property immigration, in addition to introducing tax cuts to stimulate the economy.

Chong Sio Kin, President of the Association, estimates that 10,000 transactions were completed during the first eight months of the year. If one assumes the total transactions of this year to be 11,000 then it would represent a reduction of 50%. The fall is likely to affect other sectors such as construction, decorating, legal services, banking and home furnishing. This is the reason the American government is trying to bail out the housing and mortgage markets. Mainland China is also planning to loosen its macro control policies and reduce tax to revitalise the real estate industry. The Macao government should be wary of the crisis and take rescue measures to rejuvenate the market as soon as possible in order to avoid an ensuing financial crisis. It is projected that GDP in the fourth quarter this year will register negative growth and the same is likely to be true in 2009.

Chong added that other sectors such as hotels, conventions and exhibitions, retail and F & B have been adversely affected by visa restrictions, with small and medium enterprises bearing the brunt; they have reacted by making their workers redundant and cutting their pay. Property vacancies are rising while rents are falling, delivering decreasing income to landlords and retail businesses.

A shrinking global economy will mean less tourism. While the government is in no position to affect the global economic situation, it could well request laxer visa regulations, and is advised to do so as soon as possible. Chong suggests the following measures: (1) Adopt border regulations similar to Dongxing City in Guangxi province and neighbouring communities in Vietnam, allowing Zhuhai residents to stay in Macao with a Macao pass, with a view to allowing the urban residents of Guangdong province to have the same access to Macao in order to enhance PRD regional co-operation and tourism; (2) allow more cities to enlist in the FIT scheme.
   
Investment immigration measures are widely adopted around the world to attract talent and capital. Take Hong Kong as an example: one can emigrate to Hong Kong with an investment of HK$6.5 million, placed either in property or in the stock market. Macao can only offer the property market for investment, where prices are just a quarter of that of Hong Kong. Chong suggests that the government establish a credit system for screening applicants in terms of education, work and business experience, language abilities, age, talent and special skills.
 
Tax reduction implemented by the Mainland government is effective in reviving the market and as such should be adopted by the MSAR government, the Association said.

The Association suggests that property transaction stamp tax be cut by 3.15% and that the registration fee of the title deed be 2% for the next two years – until 2010 - with a view to spurring transactions and helping real estate companies ride out the crisis. It was also pointed out that the property tax of 16.8% on property rent per year is not really reasonable as it is higher than the 12% supplementary income tax levied on businesses. It was therefore suggested that the rental house tax be reduced to the same level as residential house tax, which is 5%. This would be in line with Macao’s simple low tax regime and would shore up the rental market.

Developer Liu Chak Wan denies rumours that the Tin Wai Investment Limited, which won the bid for two residential land plots in Baia Norte do Patane early this year, intends to renege on its bid. Liu, whose brother Liu Hei Wan heads Tin Wai Investment Limited, stated publicly that as far as he knows the company is discussing the project plan with the government following its down payment and is now awaiting government approval for the project to start. He also observed that Macao’s housing market is cooling due to the current international financial gloom and is a normal market adjustment although it may take some time to return to earlier levels. He admits he is not sure what will become of the economy but is confident about Macao’s property market.

Many attribute property price hikes in recent years to property agents. However, now that property prices have fallen back to early 2005 levels with steeply reduced transactions those agents are likely to go broke or see their income diminish. Between 2005 and 2008, more than 70,000 residences have been purchased; they are likely to become negative assets, and may cause social problems.

As Honorary President of the Association of Real Estate Agents of Macao, Cheong Lok Tin perceives that four pillar industries support the Macao economy. He claims it is relatively easy to resolve the crisis currently facing Macao compared to other regions highly dependant upon the financial sector. He believes that three elements determine the value of property: its quality, expectations of economic growth and the financial sector’s confidence in the property market. Apparently, what is lacking now is confidence.

Ronald Cheung, Chief Executive Officer of Midland Realty (Macau) thinks that with sagging confidence comes opportunity. He advocates that the government lend a helping hand to prevent the property market from falling further, failing which the confidence of foreign investors will be further shaken. The key now is to seize the opportunity to build confidence. He believes that any measure - be it liberalising property immigration regulations or that of the individual travel scheme - will be effective in restoring market confidence. As for the banking sector, he recommends that a plenary session be convened in which the government may well serve as guarantor so that property prices will not decline further, with the property market acting as a haven for capital.

A foreign investor surnamed Lei believes that Macao may well do something to save itself. He points out that just as the gaming industry has been boosted, the Chief Executive may well take measures to shore up the real estate industry, by expanding infrastructure. However, he claims that the government is taking too long to plan the undertaking. With a US-funded partner that may be able to invest as much as $6 billion in Macao, he points out that the Macao government demonstrates a lack of support for private investment. Unless the government frees itself from this mindset it will not be successful in attracting new investment.

Rico Kwok, Executive Director of Centaline (Macau) confides that his company has been losing money for the past six months and therefore urges the government to implement measures to lessen unfavourable factors in order to stabilise the property market and rebuild residents’ confidence rather than adopt an indifferent stance to their interests. He also maintains that as property prices have returned to 2005 levels residents who bought property in the past two years are likely to have negative assets. If prices continue to drop, all Macao residents will be affected.

The current financial crisis has made the global economy falter. The stock market gloom is ominous enough, with the Hang Seng Index recently suffering its biggest single-day slump of 6,000 points to 11,000. Consequently, the Macao Association of Real Estate Development has proposed a series of rescue measures, including the reduction of stamp duty for locals buying property in the next two years, priority to deserving property projects, the urging of private projects to start as soon as possible, and government subsidies for shop rentals, etc. It is hoped that the government adopts measures as soon as possible to avoid a repeat of the 1993 property slowdown, which led to a long-tern economic recession.

The measures recommend (i) a 2.5% reduction in stamp tax for locals buying property in the coming two years commencing November this year (reducing the current tax to 0.65%), which, upon expiry, may or may not be continued; (2) for those private developers who have capital for residential property development, the government should accept their deposits and approve their projects as soon as possible, while exempting them from related taxes and fees so that developers can start their projects earlier to help offset the imbalance of the industry slump due to the falling number of private construction projects; (3) the government should consider subsidising the airlines, by way of air ticket allowances, in order to promote the local tourism, convention and exhibition industries. The government may also attract more visitors via PR companies in the US, Europe, the Middle East and Asia, which are the primary sources of Macao’s tourists.

It is also suggested that a 50% subsidy on rent be provided to small and medium enterprises, reducing or exempting their property taxes, while strictly enforcing relevant rental regulations and laws and eventually revitalising the rental market. It is also proposed that the government reward real estate agencies that bring transactions to a conclusion with 5% transaction volumes each quarter, and introduce an immigration mechanism for attracting talent and capital.

Some local analysts comment that Macao relies as much on the economic environment of neighbouring areas as it does on international and regional economic factors. The market anticipates the Mainland loosening the FIT scheme by the end of next year, if not by the middle of next year.

It is claimed that relaxed visa restrictions will bring immediate economic benefits. Visitors to Macao via the FIT scheme totalled 371, 000 in September, some 39% down on August (603,000). According to the statistics, there are 7,000 fewer visitors to Macao on average every day, which in turn is having a serious impact on the retail and F&B industries. The financial crisis has worsened the situation, thus it is incumbent upon the government to make appropriate adjustments.

Others say that the tightening of the FIT scheme was designed to prevent the Macao economy from overheating. However, now things have changed in the market the government should adjust their policies accordingly. At the very least, visa restrictions should not be further tightened. Rather, they should be loosened in the near future to save the market from a slump.

It has been a very interesting few weeks around the world and the impacts are being felt everywhere.

People are cautious, many people are saving and the traditional swings and round-abouts of stock markets and property seem to be out of sync. The old adage is that when things are really bad, it can be an amazing opportunity for those who have reserved wealth.  Property prices will fluctuate and there will be increased pressure on owners and landlords to reduce prices.  This will stimulate the market and restore some balance to overheated markets.  Grossly inflated prices on the back of the last boom will taper and decline to levels of a few years back.

Looking forward 3 years, it will be remembered as “Black October” and comparisons will be made between this period and past periods.  In the past thousand years, one thing has been a constant:  the fact that markets go up and down and after each down period, it has always come back up … it is just a question of time.

Affected by the subprime crisis and speculators dumping non-performing assets, how will Macau’s real estate market fare in the short run? What measures should investors take to weather this sudden change? Can current prices be maintained in the fourth quarter? Kin-chong Wong, President of the Association of Real Estate Professionals of Macau, sheds some light on these questions.

According to Wong, the financial tsunami has caused investors’ confidence to sag; as a result, the local economy will further slow down. Real estate prices are estimated to fall by about 10% over the previous quarter and a lower turnover is on the cards. Compared to those regions whose prices plummeted by nearly 30%, however, Macau is something of a rarity and has suffered only moderately.

Investors are adopting a ‘wait and see’ attitude. Even though price hikes in 2008 are not comparable to those of 2006 and 2007, says Wong, investors need not worry too much about a further drop. Speedy booms often lead to a real estate bubble. In 2005, for example, Prince Flower City in Taipa attracted MOP 1,500/sq. ft. before rising to nearly MOP 3,000/sq. ft. in 2006/07, a 100% increase. From another perspective, people should not be too pessimistic about the financial turmoil as it may be an unexpected opportunity for the proper adjustment of Macau’s real estate market.

In reality, two factors will influence Macau’s economy. One is the stock market, which will track the US economy; the other is the policies of the new MSAR administration after 2009. As long as the US government adopts stabilising measures, says Wong, the bearish clouds drifting around the global economy will gradually evaporate. Investors have experienced the effects of SARS and Beijing’s macro-control policy, and they are more careful and better prepared for the future.

Wong thinks that the future of Macau’s real estate market will on the whole be good. The successful funding of the Hong Kong-Zhuhai-Macau Bridge has effectively boosted economic development on both sides of the Pearl River, and with the bridge expected to be completed in 2010, Macau will benefit further. In addition, the gaming and tourism sectors are still booming despite adverse conditions, creating huge tax revenues for the city. It is reported that 10 more entities are expected to come to completion on the Cotai Strip within the next five years. The prosperity of the Strip industries will boost demand for manpower, and the rising demand in the rental market will fuel property prices. Therefore, investors should not panic sell. A price war in the property market is unlikely; neither is there likely to be an economic decline as the current adjustment is only temporary. 

Macau’s real estate market is in a transitional period as a result of global economic instability. Wong believes that it will improve after the policies introduced following the US presidential election become clear, with speculation ending after the third month of the lunar calendar. He suggests that developers wait for the next wave instead of selling new flats at a discount at the end of the year, thus depleting buyers’ confidence.

“Newer quality flats priced medium-high are more resilient to price cuts and represent more value for investment,” says Wong. Four elements are vital in embarking upon real estate investment: management, facilities, location and age. He cites Nova City as a good example - as its management, facilities, and location tick the ‘quality’ boxes, the current MOP 3,000/sq. ft. represents the bottom price based on its cost (building cost plus land price) and suggests that now is the time to buy. A rebound in the global economy means the chance of a price hike is likely.

While the property market remains sluggish, quality properties are still much sought after. The Millenium Court project, located on Avenida de Horta e Costa, has a lot of interested buyers even though it is not yet completed. As a result, the developer plans to offer the first batch of 10 flats at a special price of some MOP3,000 per square foot.

Housing prices might go up by the end of next year
Ung Choi Kun, Ung Kin Kuok and Wu Ka I - the developers behind Sai Kei Hou Teng and Sek Po Tak, Regional Director of Centaline (Macau) - held a press conference yesterday. According to them, the real estate market is currently at a relative low compared to 2007 and the first half of 2008 but is still in better shape than a decade ago. They remain bullish about prospects and anticipate that house prices will pick up again between the second half of 2009 and 2010.

New housing projects like this occupying tens of thousands of square feet are going to be rare in the Avenida de Horta e Costa district in the future. The project features adequate parking space, a shopping mall and a 40,000-square foot podium garden; in addition, Avenida de Horta e Costa is a traditional quality residential area with a scarcity of land for development. Having successfully acquired this land ten years ago, the developer plans to include parking spaces in the project, to be purchased by homeowners and to be used by the public so that households and patrons of the shopping mall can enjoy greater convenience. The shopping mall - the largest in the area - seeks to provide a wider variety of choice for residents as well as convenience. Designated for the exclusive use of residents, the podium garden will allow the elderly and children to enjoy substantial leisure facilities without leaving the premises.

New housing projects rare in the area
According to Sek Po Tak, hardly any land is available for new property development in the area. Moreover, newly built structures in this area may not exceed 90 metres in height, in deference to the city’s world heritage obligations. High-rise properties are consequently becoming scarce in this district.

New properties for sale are always rare in the Avenida de Horta e Costa, and as such they are always sought after and well-received. The majority of the buyers who buy new properties are those who desire to move to a new residence or those setting up families of their own. Most of the buildings in the existing large housing projects at the Avenida de Horta e Costa are relatively old - such as Hang Wan Kok, Nga Lim Jardim and Yuet Sau Garden - and on average were built more than 15 years ago. Very few of the flats in these buildings are offered for sale on the market and those that are are priced between MOP3,000-3,800 per square foot. As not much new housing is available in the area, new flats always attract attention whenever they appear. Grand Oceania, also located on Avenida de Horta e Costa, attracted long queues of buyers who queued overnight for a purchasing ticket. Now, the same flats are priced over MOP4,000 per square foot on secondhand sales. Centaline has been entrusted by the developer as the sole property agency, with the agency agreement signed just yesterday.

The Macau government recently adopted several macro-control measures - including suspending the issuance of new gaming licences as well as halting approval for applications for new casino projects and more gaming tables - in an attempt to curb the burgeoning growth of the gaming sector. These measures have attracted attention from all sectors of society, and potential buyers are concerned that Macau’s economy will be adversely affected. However, Jones Lang LaSalle Macau believes that these measures have barely affected Macau’s property market.

Boosted by the gaming boom, Macau’s economy has been the region’s best performer. With the liberalisation of the gaming sector, Macau’s gaming and construction sectors have posted rapid growth, accounting for more than 80% of Macau’s total GDP in 2007. So, how will the government’s new policies affect Macau’s property market?

Existing Gaming Tables Approach Over-supply
According to Jones Lang LaSalle Macau, it is rational for the Macau government to curb the excessive growth of the gaming sector, as the existing number of gaming tables in Macau is approaching a situation of oversupply. The new measures are conducive to preventing excessive competition; Macau should also start expanding ancillary sectors to achieve a more sustainable growth model.
 
While Macau has outstripped Las Vegas in terms of gaming revenue, it nevertheless faces diverse challenges. First, the rapid increase in the number of gaming tables has led to a decline in daily table revenues; in 2007, table revenues declined to around US$6,700 from around US$23,600 in 2003. Second, the rate of table usage in Macau is lower than that of Las Vegas – on average, one table received 14,512 guests in Las Vegas while in Macau one table served only 6,169 guests in 2007. Third, Macau’s gaming industry is predominantly centred round VIP gaming and as such lacks diversification. In 2007, VIP baccarat accounted for 66.5% of Macau’s total gaming revenue.

Advisable to Promote Ancillary Industries
With the implementation of the Mainland’s restrictive policies on individual travel to Macau designed to curb Mainlanders’ gambling in Macau, some early signs of cooling seem to be setting in, as in the y-o-y growth in VIP Baccarat, which slid from 73% in Q1 08 to 52% in Q2 08. While property developers and casino operators may reassess their long-term business plans in Macau against the backdrop of slowing gaming, the importance of boosting ancillary industries becomes apparent. From the long-term perspective, Macau should consider diversifying its economy by freeing itself from its current reliance on VIP gaming, and seek a more sustainable development mode for its gaming industry as well as its economy as a whole.

According to Jones Lang LaSalle Macau, apart from building more non-casino tourist sites, Macau should develop its MICE sector. In 2007, Las Vegas hosted about 23,800 events with 6.2 million attendees, while Macau held only 391 events for 75,723 attendees, just 1.2% of the figures recorded for Las Vegas. It is worth noting that the MICE sector generated revenue for Las Vegas of US$8.48 billion or US$ 1,361 per attendee in 2007, which was much higher than the city’s return on gaming of US$277 per head.

Construction Sector likely to Bear the Brunt
‘With its existing casino facilities Macau is able to serve a much larger number of visitors. The impact of the recent restrictive measures on the gaming sector, therefore, will be more on the psychological side than on the economic side,’ says Marcos Chan, Jones Lang LaSalle’s Head of Research, Hong Kong and Macau. ‘The construction sector will probably be the hardest hit but the impact will still be mild as the construction sector had anticipated that the market would slow in Q4 07, and most of the previously approved projects remain unaffected by the new measures. For the property sector, the high-end residential market will stay in good shape due to ongoing housing demand from expats employed by the casinos. The market for medium and small properties will face some consolidation pressure with the completion of current projects - but a sizable price correction is unlikely with the current tight supply,’ says Chan.

Macau’s economy is slowing down as the government steps up its macro-control of the development of the gaming sector, and the mainland tightens its FIT Scheme. Lok Wai Dak, Executive Vice President of Real Estate Association of Macau, says that the local property market has entered an adjustment period. As the economy slows down, property prices will drop by 12-15% in the second half of the year. And this adjustment seems to coincide with that on the mainland, he believes that the period will not last longer than one year, and it will cease at the end of the year, so property prices will not fluctuate unduly.

According to Lok, property transactions grew by 30% annually between 2003 and 2007, and property prices also rose by some 30% annually. As of now average new properties are priced at MOP2,500 per square foot or more, while high-end properties between MOP6,000-8,000. Although the market has been under external economic influences this year and the property market is in adjustment, residential leasing market remains buoyant and as a result average property prices actually fall between 5-8%. In this backdrop, prices of an average residence in Taipa and high-end residences register a more marked fall, with some high-end residences by more than 15%, while those in Macau remain largely intact.

As the market of Macau keeps expanding, its labour force keeps growing. The key elements of the property market are in place - demand and brand products. The builders and developers in Macau now have a better knowledge of branding and understanding of the market.

The number of visitors and foreign workers are following the influx of international investments into Macau. The number of visitors and foreign workers are increasing, so retail business is also booming. As a result, the demand for quality retail spaces is rising proportionately. In addition, foreign investors are optimistic and are going about setting up branches in Macau. (1)How is the current demand and supply of office, commercial and retail buildings? (2) How good is the potential of the retail space at new large scale resident buildings? (3)Which retail district will be the most financial rewarding investment? Three experts share their views with us to shed light on these important questions.

(1)How is the current demand and supply of office, commercial and retail buildings?
Gregory Ku, Managing Director of Jones Lang LaSalle, Macau
Office Buildings Are in Short Supply
“There was no supply of new office buildings in Macau in 2007. At that time, the supply of offices totalled 9,648,000 ft2. In 2008, the completion of the FIT Centre added 400,000ft2 of office space. However, the overall office vacancy remained low, with 10% in the case of A-class offices and 20% in the case of B-class. With the completion of business projects in Macau and Taipa in 2008, overseas companies are looking for quality offices to set up their branches. The FIT Centre, an A-class office building in Macau, was opened for lease in Q1, and 20% of its offices were leased at that time. It received a great deal of interest and enquires. . . Figures show that 2006 and 2007 saw 3,110 and 3,405 newly established companies respectively, an increase of 295 over that of 2006. As of now no new office buildings are being built and it is apparent that there will be a shortage of office space in Macau.”

Simon Sio, Managing Director of Lek Hang Property Development Company Ltd.
Vacancy Rate of Downtown Stores Is Close to Zero; Casino Stores Are in Ample Supply
 “Rua do Campo, Rua De S. Paulo, Senado Square and Avenida Nova are well-known tourist areas. The closer the store is to Senado Square the higher the rent will be for the store. The stores in these areas sell to both tourists and locals alike, and as such their rents are even higher than those in the casinos. Even so their vacancy rate remains near zero. On the other hand, new stores are becoming increasingly available in the casino areas. The Venetian Macau Resort Hotel alone offers its 968,000-square-foot Grand Canal Shoppes, opened in 2007, for rent to stores. The Four Seasons Hotel is set to open in 2008. It will feature an 110,000-square-foot duty-free shopping mall. However, since the casino stores target different consumer groups, they might not necessarily ease the stress of the tight supply in the downtown area of the city. More hotel projects will be open in Macau over the next few years. It is hoped that this new supply of stores will be in demand.”

Denis Lee – District Sales Director of Commercial Properties, Midland Realty (Macau)
No New Supply of Commercial Buildings in the Next Three Years
“In 2008, only two new commercial buildings have been launched, namely the FIT Centre Macau and the Av. Almeida Ribeiro no. 39. The first three storeys at the FIT Centre are designated for an 80,000 square foot shopping mall, while the first four storeys at Av. Almeida Ribeiro no.39 offer a 60,000 square feet of shopping space. Apart from that, the basement and the first four floors at Macau Ginza Plaza located in the central district are all for shops, providing nearly 100,000 square feet of space. It is estimated that the amount of square feet for shops in 2008 will amount to a total of 240,000 square feet. Being a famous tourism attraction in Macau, the central district is a magnet for customers and as such has a high demand for shop spaces. While no commercial buildings are currently under construction, there is no sign that the government is going to appropriate land for this purpose. Apparently there will be no new supply of new commercial buildings over the next three years, falling short of the demand.”

(2)How good is the potential of the retail space at new large scale resident buildings?
Gregory Ku, Managing Director of Jones Lang LaSalle, Macau
Investment Value Depends on Market Positioning
“While new residential projects with retail spaces are good for investment, it is nonetheless necessary to identify the right market segment for them. Take the Macau Ginza Plaza, which is located in the Central District. The area is frequented by high spending consumers, and as such it is good for a shopping mall to introduce middle-or-high-end retailers. On the other hand, emerging residential areas such as Areia Preta are populace enough but their visitors have an average level with regard to their buying power, and as such are more suitable for launching supermarkets, tea restaurants or grocery stores, such as Japan Home.”

Simon Sio, Managing Director of Lek Hang Property Development Company Ltd.
Stores in Emerging Residential Areas Are Good For Long-Term Investment
“Emerging residential areas, such as Doca do Lam Mau, Fai Chi Kei, Areia Preta and downtown Taipa, have seen soaring housing prices due to the development of many large-scale housing projects. The housing price of an area is a major indicator of the residents’ buying power. Those who can afford to live in the aforementioned new residential areas are mostly emerging middle class or SME owners. These new middle class professionals have benefited by the recent economic boom. Their consumption power should not be underestimated. Thanks to the high population density, residents’ strong consumption capability, convenient transportation, and the tight supply of stores in the area, purchasing stores there for long-term investments or renting has a high potential for profit. The current return might be relatively low, but their future prospects should be promising and stable.”

Denis Lee – District Sales Director of Commercial Properties, Midland Realty (Macau)
Investment Potential Depends on Occupation Ratio
“Community scale and population of residents are the key factors that determine the investment potential for shops in residential areas. Take the Pérola Oriental. The area is occupied mostly by employees from overseas and Hong Kong, as well as residents that are in the middle class bracket. In recent years, new quality residences such as The Residencia Macau, La Cite and Villa de Mer were sold at good prices, but the buyers are mostly Hong Kong investors and investment immigrants. So most of its residents are tenants and their occupation rate is only 30%. While rentals in the area has increased by 50% from $10-12 per square foot in 2006 to $20-25 in 2008, it is still low relative to the rental of $600 per square foot in the tourist central district. The investment potential here will only get better as occupancy rates increase.”

(3)Which retail district will be the most financial rewarding investment?
Gregory Ku, Managing Director of Jones Lang LaSalle, Macau
ua de S. Domingos and Taipa Have Good Investment Potential
“Last year, the average rental at Rua de S. Domingos was around MOP200 per ft2. In 2008, some retailed spaces at the area were leased at MOP400 per ft2, registering a growth of 100%. Since the area is a tourist spot, it is crowded with a large number of multiple consumers and the vacancy rate of the retail space is zero. As rentals stimulate sales prices, the rentals and prices of the retail spaces still have room for increases. In addition, many middle and high class residences are about to be completed in Taipa, the consumption and living quality of these residents are improving. It is suitable to open high-end restaurants, such as Japanese, French or Italian. Since the prices of the retail spaces in Taipa are lower, it is worthwhile to invest on Taipa.”

Simon Sio, Managing Director of Lek Hang Property Development Company Ltd.
Traditional Residential Areas Offer Huge Investment Potential
 “Traditional residential areas, such as Avenida de Horta e Costa, Avenida do Ouvidor de Arriaga, Rua do Campo and Avenida do Conselheiro Ferreira de Almeida, are mostly inhabited by the middle-class. Young people are the bulk of the consumers. They have benefited the most from Macau’s economic boom, and most of them do not have families to support. Therefore, they have greater buying power. In spite of the soaring Consumer Price Index in recent days, the retail business in these areas remains good. The stores around the McDonald’s at the Avenida de Horta e Costa are the most popular, with rental price per foot ranging between MOP100 and 150. Although the overall rents have gone up a great deal, it is still relatively low compared to that in the downtown area. Their potential is quite high. It is a good investment to buy them either to lease or for your own business.”

Denis Lee – District Sales Director of Commercial Properties, Midland Realty (Macau)
Increasing Population in Taipa Makes Shops There Worth Investing
“Today, much of Macau’s development is in Taipa, including many of its infrastructure projects. Commercial projects such as the COTAI Strip have enabled Taipa to come into its own. In terms of population, there are more people in Taipa than in the Pérola Oriental area. Most of Taipa’s big residential areas and commercial shops are found in the to-be-completed Prince Flower City and Park’n Shop Flower City, where many shops are turning from restaurants to retailing catering to daily needs of the neighbourhood. The increasing population in the area will make it worthwhile to have mid-term investment over the next five years.”

Recently, Centaline (Macau) organised some group tours to the display flats of the Lv Yang Villa, attracting nearly 300 people. According to Zheng Xu, the Executive Director and General Manager of the Zhuhai Huafa Property & Marking Consultancy Company, Macau people tend to go for large flats in Zhuhai. 100 m² flats with a partition of three bedrooms and two living rooms were sought after in 2004. 150 m² flats featuring four bedrooms and two living rooms became what Macau people desired in 2006. The buyers, the majority of whom are university professors, public servants and police officers, go house-hunting in Zhuhai because prices of similar properties in Macau remain sky-high and there is a lack of large-scale community facilities.

According to Wong Kwok Kei, the Manager of Nova Gardens Branch, Centaline (Macau), those who went on the tour were mainly high-end property buyers and investors. Some of the buyers fancy large, quality flats featuring full sea-views with good, green gardens and privacy. While properties like that are a rarity in Macau due to the scarcity of land, the Huafa’s Lv Yang Villa can meet all the aforementioned requirements, be it the location, the view or the size. It is therefore of great appeal to buyers who demand quality living. As the convenient transportation appears to be a good value-added factor for the Huafa project, some Macau investors who have already invested in Zhuhai property planned to capture the opportunity to replace their current investments with large flats of higher quality.

At an earlier time, a flat at the Lv Yang Villa was marketed at a minimum price of some MOP6 million. Before the project was on the market, 80 transactions had been registered in private sales. Rico Kwok, the Managing Director of Centaline (Macau), revealed that Huafa had good word-of-mouth publicity as its housing projects in Zhuhai have never been left uncompleted.

The recent confirmation of the Hong Kong-Zhuhai Macau Bridge’s financing scheme has apparently boosted property markets in the three cities, giving reasons for Macau citizens to purchase properties in Zhuhai. Some Zhuhai property agencies are now setting up showrooms in Macau, indicating their confidence in the city’s market.

Zheng Xubin, Executive Director and General Manager of Zhuhai Huafa Property & Marketing Consultancy Company, which launched a showroom in Macau, said that 8% of the buyers of 1,000 flats released in Huafa New Town in 2004 were Macau citizens. More and more Macau citizens purchased their “second home” in Zhuhai, owing to an increased income and assets value, not to mention the yet-to-be-launched 24-hour border service. Huafa Century City was launched late last year, and the proportion of Macau buyers rose to 20%. There is an apparent trend of Macau people buying properties in Zhuhai.

The confirmation of the Bridge did not seem to give impetus to property prices in Zhuhai. But rather, due to the global economic slowdown, investors remain undecided and the property market is “cooling down”. Transaction volumes dropped slightly this year. However, property prices in Zhuhai are lower than that of major cities such as Beijing, Shanghai, Shenzhen and Guangzhou. As such they have proved resilient to downward pressure, with only a slight drop. The property markets in the whole country under went macro-control in late 2007, whilst the Huafa Century City recorded a daily sales volume of RMB1.28 billion.

Lvyang Villa was recently launched for sale. Originally priced between RMB30,000 and RMB40,000 per m2. The minimum now stands at RMB32,800 per m2 to accommodate the market, which covers a decoration fee of RMB6,000 per m2, oriented to attract Macau buyers. After completion of the Bridge, driving from Hong Kong to Zhuhai will only take 20 minutes, which will give another incentive to Hongkongers to become new buyers and investors.

In early 2008, two plots of residential land in Fai Chi Kei were purchased by the New Tenhon Investment Ltd. for a price that was nearly 10 times more than the bottom-line asking price. The Hong Kong-Zhuhai-Macau Bridge project was approved for its go-ahead while several property tax favours were announced by the government. Meanwhile, interest rates were further cut and inflation continued to rise. In this setting, investors were attracted to Macau’s property market purchasing properties in the hope of retaining their asset value. With those favourable factors and the boom of the gaming industry, many are bullish about Macau’s property market and predicted a rise of 15% in the housing price. However, Q1 of 2008 did not see the expected buoyant business, only about 4,000 transactions registering, a 30% drop from the figures recorded last year. Even so,(1) property prices kept rising while transactions decreased. Why? (2) Where is Macau’s property market heading in the next two quarters? Will high-end property sales still take the lead? (3)On what basis should we choose property for a short-term or a long-term investment?

(1) property prices kept rising while transactions decreased. Why?

Rico Kwok, Executive Director of Centaline (Macau)
Property Prices Rise by 20%, Shoring up Sales Volume
“The sub-prime mortgage crisis in the U.S. has affected Macau’s property market during the first two quarters of 2008. Homebuyers and investors began to take a wait-and-see stance. As luck would have it, no new properties were available to the market during Q1, and the micro-economic measures were stepped up in the Mainland while natural disasters struck one after another. This resulted in a sharp decline in property sales in May in which only 2,200 property transactions were registered.  This was a drop of 40% when compared to the 3,900 of the same period in 2007. However, in spite of the decreasing number of transactions, investors are still optimistic about the property market, since property prices and rental rose by nearly 20%. Take those 800-square-foot flats with two bedrooms in Nova Taipa Garden. They are rather sought after because of their high ratio of usable partitions and potential returns on investment, so the average price rose from $2,300 and $2,400 per square feet last year to $2,800 last May, an increase of nearly 20%. A second-hand flat with two bedrooms in Taipa currently rents from between $ 6,500 to $ 6,800.  This is an increase of 18% or nearly 20% over the $5,500 of last year. Rental returns are as high as 0.4% to 0.45%.”

Dennis Wong, Executive Director of Ricacorp (Macau) Properties
Large-scale property projects give spur to property price-hike
The Statistics and Census Service started to extend its statistics scope to include “properties in transfer” (namely transactions for which the 0.5% property transfer stamp duty has been paid) in Q1 of 2008. This means that the 0.5% property transfer stamp duty properties were transferred at high prices which may explain why the property prices in general still rose during Q1. Transfer stamp duties must be paid within three months of the down payment. This policy is believed to have hampered the re-transfer of would-be-properties by speculators, resulting in the slight year-on-year drop in property transactions for Q1. While property transactions in Q1 seemed to have slowed down, many new large property projects registered a satisfactory number of transactions, as in the case of the One Central, whose lake-view flats prices have reached in some cases to over MOP8,300 per foot during Q1 2008, much higher than the MOP7,300 to 7,500 per foot recorded during Q4 of last year. New properties and would-be properties were transferred at good prices, which perhaps explain why property prices in general still rose in Q1.

Franco Liu, Director of Savills (Macau) Ltd.
New Properties Lack Buyers - Hence the Drop in Transactions
“The experience of Macau’s property market over the past two years suggests that the market normally has fewer transactions during the first two quarters of the year. For example, the property market remained cool during the first half of 2006. The situation did not improve until a foreign fund purchased two blocks of One Central Residences and the Wynn Macau’s opening in late 2006 along with the complementary launch of other large projects such as The Praia, other blocks of One Central Residences and Le Royal Arc, the market became rather bullish. High-end properties took the lead in the market. However, the transaction volume dropped during Q1 of 2007 compared with the previous quarter due to Ao Man Long’s trial and the suspension of the ‘Investment Residency Scheme’ in April. Except One Grantai, there were no large projects on the market. However, due to the heated global economic environment, the total value of transactions for the entire year of 2007 was more than that for 2006. The situation in 2008 is the same. No new projects went on sale during Q1. As to Q2, there are only a few flats at The Residencia Macau for private sale. The related figures were not representative enough to be an important factor in the data. Lack of new properties for sale has caused the drop in the volume of transactions, while the increase of transaction prices was due to investors’ confidence in the market for the near future. Re-transfer of would-be properties and large flats were transacted at good prices.”

(2) Where is Macau’s property market heading in the next two quarters? Will high-end property sales still take the lead?

Rico Kwok, Executive Director of Centaline (Macau)
Property Prices & Sales Volume Remain Stable
“Beginning this May, a couple of new properties had a soft sale and promotion, which helped dispel the bearish mood in the property market. The Residencia Macau at the Pérola Oriental area took the lead by launching to the public for sale. Since there has been a hunger for first hand properties for a long time, the launch was well received on its first day and registered satisfactory sales, while the transaction prices are going even higher than the previous subscription prices. Similar positive results were registered with another new residence made available for sale during the same period in Macau. It is predicted that property transactions will remain stable during the second half of the year, at a level between 2,000 to 2,500 units. Property prices will roughly remain the same as those registered during the first two quarters. Prices of quality properties will linger between $5,000 and $10,000 per square foot.”

Dennis Wong, Executive Director of Ricacorp (Macau) Properties
Property Market in the Next Two Quarters will See Adjustments
“30% of all transactions in Macau’s property market are speculative, of which 10% are by Hong Kong investors. Events in Hong Kong have an impact upon Macau. For example, the fluctuation in Hong Kong’s stock market in April and the fervent purchase of two super deluxe properties - Palazzo Villa and Celestial Heights - in May drained much of Hong Kongers’ capital causing their purchasing power in Macau to shrink. Apart from that, property prices increased by 30% in 2007 over that of 2006, and are now at an expected level. Therefore, it is estimated that the property market will undergo an adjustment during the next two quarters. It is expected that prices of quality properties will drop by 10% to 15% to stimulate sales. According to past experience, launching new properties in the market will generally push up the overall property prices as well as stimulate other transactions, and favourably impact the second-hand property market. Properties launched in recent years are mostly quality or high-end. Therefore, they will still take the lead in the property market in the next two quarters.”

Franco Liu, Director of Savills (Macau) Ltd.
First-Hand Property Take the Lead While Second-Hand Remains Stable
“Transactions are not as numerous as expected because investors are waiting for the next opportunity. In the latter half of 2008, a number of new properties will be launched for sale. Apart from The Residencia Macau, the announcements that Avenida Wai Long and the Windsor Arch in Taipa will go on sale sometime during Q3 and Q4.  This will stimulate the property market. Therefore, new properties are expected to grab the attention of investors. Although the market cooled down in Q1 and Q2, it is possible that the total transaction volume in 2008 will be more or less the same as that for 2007 since many valuable properties will go on sale before Christmas. Large infrastructures play an important role in heating the property market. In 2008, high-end residences lead the market, while first-hand properties sell better than others the second-hand market remains stable.”

(3)On what basis should we choose property for a short-term or a long-term investment?

Rico Kwok, Executive Director of Centaline (Macau)
Medium Priced Properties May Be Good for Short Term Gain
“Macau’s economy will see various large projects completed over the next two years. Along with these, a large number of foreign workers will come to Macau many of whom will be managers, which will seek quality residences. By then properties of $2 to $3 million will be much sought after. Now that much of the medium priced properties have been bought, but because of the outside market situation, investors who over-bought those properties are anxious to cash out. If those relatively new second-hand properties are bought now, such as Nova City, La Cite or The Praia, etc., at prices 10% lower than the market, chances are that buyers will gain a profit in the short term, while prices of such properties are much less likely to fall below the average price of residential properties.”

Dennis Wong, Executive Director of Ricacorp (Macau) Properties
Second-Hand Properties are Suitable for Long-term Investment
“Influenced by the depreciating U.S. dollar to which Macau’s currency is indirectly pegged, and the rising value of the RMB, Macau has seen a continuous rise in inflation, which in January was at 5.94%, a record high since Macau’s handover in 1999.  Furthermore, it is expected to rise to 10% by the end of 2008. On the other hand, interest on bank deposits is close to zero.  Since a return on investment is the key for long-term investors and that is precisely what second-hand properties offer investors, since such properties can earn rentals once leased. Currently, the rental of a 1,000 ft² flat of MOP2 million is between MOP 6,000 and MOP 7,000 per month. In view of the prospects that a large number of foreign workers will come to Macau over the next two years, residential rentals are expected to rise by 20%.”

Franco Liu, Director of Savills (Macau) Ltd.
New Quality Properties Still Have Investment Potential
“If other new housing projects can be made available to the market during the fourth quarter, the property price of Windsor Arch in Taipa is likely to reach the highest price that was registered last year. Properties in Nam Van Lake area of the Macau Peninsular will have the potential to be a rather good investment.”

Bullish about Macau’s real estate prospects, the Carlyle Group, one of the premier global private equity funds, recently bought two residential buildings at the Areia Preta, which are expected to be inaugurated in the middle of 2009, for an estimated sum of MOP2 billion. The two buildings, comprising of a total of 372 flats, will be high-end residences catering to the demand for quality accommodation by foreign employees and local residents. These flats are expected to be priced around MOP 3,500 per square foot.
 
Property dealers indicate that while real estate sentiments were lower in Q2, Macau’s properties are still sought-after by foreign investors. Several investment deals were registered during the first six months of this year. The property market might turn for the better during Q4 with a rising trend expected to set again the following year.

Some local bankers think that the fact that two buildings are being converted into high-end residences clearly indicates the buyer’s optimism regarding Macau’s property market, not to mention a few property agents also have this view. However, the Subprime Mortgage Crisis remains unsolved and oil prices as well as the inflation rate are still high causing the overall optimism to be limited. The expected market upturn in Q3 may have to wait until Q4.

According to Gregory Ku, Managing Director of Jones Lang LaSalle Macau which is the broker for the deal, and provides property management consultation service, this transaction reflects international investors’ confidence in Macau’s prospects after 2009. With the Cotai Strip development projects being completed, Macau is in for an even more optimistic outlook. As a matter of fact, overseas investors have traditionally not been interested in Macau’s property market. But in recent years, many international funds have been looking for potential projects in the city.

He added that there might be a 10% drop in property prices during the second half of the year, but that this is just an adjustment of the market. The Jones Lang LaSalle Macau views the city’s real estate sector in a favorable light not just because of the Hong Kong-Zhuhai-Macau Bridge project where financing has been committed to by the related governments, but also because of the completion of Macau’s new infrastructure and hotel projects. The property market is expected to pick up again the following year.

Impact from Government Policy Changes in Macau and Guangdong Should be Minimal in the Short Term

Underpinned by the robust economy, booming tourist sector, surging gaming revenues and the low interest rate environment, Macau’s property market maintained a steady growth in the first half of 2008. The Macau government’s new measures to cap gaming developments and the Guangdong government’s new restrictions on Individual Traveller Scheme is expected to cause little impact to the city’s property market in the short to medium term, reports Jones Lang LaSalle in its Macau Mid-Year Property Review.

Following a strong growth of 27.3% in 2007, Macau’s GDP grew by 31.6% y-o-y in 1Q08. The total export of services surged by 46.3% y-o-y, driven mainly by the gaming sector. Non-resident gaming revenues and non-resident accommodation expenditures grew by 62.5% and 33.5% y-o-y, respectively. Macau’s private consumption expenditure also saw a healthy growth at 9.6% y-o-y on the back of rising domestic incomes and local interest rate cuts.Total visitor arrivals in 1H08 amounted to 14.9 million, up 18.1%. Visitors from Mainland China accounted for 59% of the total. Meanwhile, tourism receipts increased by 21.7% y-o-y to MOP 8.44 billion in the first quarter.

In April, the Macau government announced that no new gaming licences and casino development plans will be granted, including application for new gaming tables in existing casinos. In May and July, the Guangdong provincial government also tightened its Individual Traveller Scheme to further limit the number of Mainlanders to pay visit to Macau. Meanwhile, weekend direct-flight services between some selected Mainland cities and Taiwan also commenced in early July. These new measures have greyed Macau’s overall market sentiment to a certain extent; however, their impact to the overall property market is unlikely to be significant in the short to medium term.

Residential Market
Following the US interest rate cuts, Macau’s average best lending rates were further lowered from 6.75% to 5.25% during the first quarter. In June, Macau’s Composite CPI surged by 9%, pushing the city’s real savings and mortgage rates deeper in the negative regime. As such, properties become an increasingly attractive asset class to hedge against inflation.
On the supply side, developers continued to launch new projects for sale despite the relatively subdued market sentiment. The more notable projects included The Buckingham, The Residencia Macau, Windsor Arch, Tower 2 of The Praia and La Cite. All were launched in 1H08. Grand Villa in Macau Peninsula, which comprises a total of 46 units, was the only new completion recorded in the first six months. For the remainder of the year, a total of about 2,650 new residential units are slated for completion.

The second quarter saw Macau’s residential sales market slow down after the government announced to cap the number of gaming licences and tables. Although not widely spread, landlords were generally more flexible in price negotiations, while some have lowered their asking prices. The number of residential sale and purchase agreements fell by 34.3% y-o-y to 7,673 between January and May; but very likely, the total number for 1H08 will be higher than that in the same period of 2007.

Supported by strong investment demand stemming from lower interest rates and rising inflation in the first quarter, the capital values for high-end residential properties grew by 10.9% in 1H08. High-end residential rents grew by 7.7% over the same period on the back of growing leasing demand from expatriates and a tight level of supply.

‘The capital values for high-end residential properties may experience a short-term consolidation due to growing uncertainties in the global economy and the potential impact stemming from the government’s intention to moderate the growth of the casino industry. However, with the continuous influx of expatriates and on the back of the tight availability of quality leasing stock, the high-end residential leasing market shall continue to perform and rents will remain on the rise. The outlook of the sales market will remain cloudy for the remainder of the year, owing to the credit tightening and uncertainties in the global market. However, the deepening of negative real mortgage rates together with rising incomes shall offset some of these negative impacts.’ says Jeff Wong, Jones Lang LaSalle’s Head of Macau Residential.

Retail Market
Macau’s tourism market remained strong in 1H08 despite the tightening of the Individual Traveller Scheme and the growing uncertainty in global financial markets. With a booming local economy, a rising population and the government’s grant of a one-off relief to residents, retail consumption demand has been strong through 1H08. The city’s total retail sales were pushed up by 46.4% y-o-y to a record high of MOP 4.5 billion in 1Q08. The sales of big ticket items were particularly strong.

Prime street shops also remained sought after. The first six months of 2008 saw capital values and rents for prime street shops increasing by 9.9% and 9.7%, respectively.
The second half of 2008 shall see the opening of The Shoppes at Four Seasons and New Yaohan, adding a total of over 400,000 sq ft of prime retail space into the market.

‘The rising population and escalating tourist arrivals will continue to underpin the growth of Macau’s retail sales in the next few years. However, stock market volatility, growing uncertainties in the global economy and the climbing inflationary environment may slow domestic spending growth in the near future. We expect capital values and rents for retail properties to remain stable in 2H08.’ says Marcos Chan, Jones Lang LaSalle’s Head of Research, Hong Kong and Macau.

Office Market
For the first six months of 2008, capital values and rents for Grade A office space increased by 13.6% and 3%, respectively.In the coming three years, there will be no new Grade A office supply. FIT Centre and AIA Tower, with their more advanced specifications and professional management, will attract demand from newly set up companies and existing tenants seeking to upgrade their office premises.‘With more mega resorts coming in the next two to three years, there will be an increasing number of retailers and business services sector tenants setting up operations in Macau. This, combined with the tight availability of Grade A office space, will help capital values and rents to remain on the rise.’ remarks Gregory Ku, Managing Director of Jones Lang LaSalle Macau.

Investment Market
In spite of the subdued market sentiment, several investment transactions were recorded in 1H08. Through a public tender, two government residential sites at Fai Chi Kei, with site area of 18,342 sq ft and 31,936 sq ft, respectively, were sold for a total of MOP 1.42 billion in January. In April, a construction site at Lot TN6 in Taipa, with site area of about 50,170 sq ft, was sold for HKD 530 million. In May, a site on the Nam Van Lake waterfront, with a maximum developable residential GFA of around 1.6 million sq ft, was sold for HKD 3.15 billion. In June, a batch of 259 units in a high-end residential development on Macau Peninsula was sold for HKD 1.03 billion.

‘No doubt the US credit crunch will continue to affect cross-border purchases from institutional funds in the short term, and with the volatility in global equity markets, surging inflationary pressure and potential interest rates hikes will hinder property investment demand in Macau. However, with Macau’s economic fundamentals remaining positive, foreign investors are still keen in looking for investment opportunities in the city. On the other hand, the prevailing negative interest rate environment will continue to help stimulate investment demand from local investors for the remainder of the year.’ continues Ku.

Macau’s time-honoured department store New Yaohan is scheduled to open in Nam Van on 8th August 2008. According to some scholars, it will help reverse the outflow of people from the central part of Macau after the large casinos in Cotai come into operation. Sio Chi Wai, a retailer, also thinks that the opening of New Yaohan in the downtown area will enhance its traditional retailing and business advantages, with a palpable rallying effect, balancing the rising Cotai area to some extent.

According to the spokesman of New Yaohan, once moved from the ZAPE area to the Nam Van district, the department store will have nine storeys instead of four. The floor area of each storey will be relatively smaller than before with some counters and shops altered. The department store will carry on its existing business strategy, with direct marketing still predominating at the new venue. According to Sio Chi Wai, the relocation to the Nam Van commercial district, neighbouring the hotels and only a few minutes’ walk from the traditional retailing area, will help retain people in the central district. In particular, to the advantage of the area, the development in the central district and the newly rising Cotai area will balance each other. The congregating effect will be maximized with more business opportunities attracting people to other surrounding districts such as the inner harbour area.

Macau’s population being 500,000 means local demands can hardly sustain large retailing or attract large, foreign-backed department stores. According to Sio Chi Wai, linking large shopping malls would help direct the flow of people from one area to another. Therefore he advised the government to launch preferential lease subsidies to attract large department stores or world famous retailers to invest in Macau. As a matter of fact, following the establishment of famous department stores, the congregating effect will become tangible, luring more brand retailers, and as a consequence retailing scale and effects will be maximized and more customers will be attracted.

With regard to local retailers, Sio claimed that the number of tourists this summer shows a decrease following the restrictions placed in the mainland on the individual travel scheme. Economic growth may slow down following the government ‘tuning’ the gaming industry. He suspects that people might be less willing to spend money. Only time will tell how big the influence will actually be. He recommended that the retailing sector pay close attention to the situation and be prepared to adjust to the new environment.

The 1st Zhuhai-Zhongshan-Macau Real Estate Expo was recently held in Macau. According to some exhibitors, property prices in Macau are nearly four times higher than in Zhuhai, so there is an increasing tendency for Macau citizens to buy properties in Zhuhai, they are therefore making every effort to expand their market share in Macau.

Cheang Tin Cheong, the honorary chairman of the Expo, said during the opening ceremony that many people in Macau choose to buy properties in the Pearl River Delta Region, mainly in Zhuhai and Zhongshan. Properties near the Gongbei checkpoint are particularly sought after. Following the acceleration of China’s reform and opening-up process, the difference in living standards between the three cities is narrowing. With more communications facilities such as the Guangzhou-Zhuhai Light Railway and the Hong Kong-Zhuhai-Macau Bridge taking shape and making it more convenient for people to move around, the three cities will all be within one hour’s driving distance from each other. The cities around the Pearl River Delta will gradually form a new living sphere with a uniform market.

Cheang believed that with the completion of the Hong Kong-Zhuhai-Macau Bridge, the road traffic network will be further improved. The number of Hong Kong and Macau people buying houses in the Pearl River Delta Region will further increase. Some Mainland property developers have observed that in recent years more and more Macau people had bought properties in Zhuhai. With such a trend of buying properties in the Pearl River Delta Region, the Macau market has potential for development.

Early 2008 saw a buoyant property market with a series of high-priced land sales, a green light for the Hong Kong-Zhuhai-Macau Bridge and repeated interest rate cuts. New properties marketed in the first quarter sold like hot cakes. But by the second quarter, the global investment sentiment turned bearish, and new restrictions on the gaming industry and the Mainland’s Individual Travel Scheme sent Macau’s property market on a downward trend. The transaction volume slumped by 30-40% year-on-year in the first half of the year. However, the property market is likely to climb up again for the following solid reasons: new hotel projects are expected to go into operation, the government’s home starter funding scheme and the newlyweds leasing loan scheme.

Sek Po Tak, Regional Director, Centaline (Macau)
Property Market Likely to Rebound in Fourth Quarter
The housing projects marketed in the first quarter, including the Residencia and the second phase of the Praia, pushed transaction volume and housing prices higher. Take the La Cite for example. After the home occupation started, its price per square foot has been on the rise since early 2008. An approximately 13% surge was registered in May against that of January. The price per square foot has been as high as MOP3,200-3,500. Since the adjustment befell the second quarter, one or two housing projects recorded an 8-10% drop in price. Even though after adjustment, the continuous inflation and the mounting labour and materials cost forced developers to sell their properties at nearly cost prices, with little room for a further drop in price. During the adjustment period, those affected were mainly overseas investors who were anxious to cash their property after suffering losses on the stock market or those who owned properties in two places. Local investors, most of whom had maintained a wait-and-see attitude, were not much affected. Macau’s economy is likely to keep on growing in the second half of the year and the property outlook is good. If large housing projects are coming on the market in the second half of the year, the adjustment period may end in September. Properties in the Areia Preta are particularly promising.

Nelson Tsui, Regional Director, Centaline (Macau), Taipa
Leasing Price Escalates – Better Buying Than Renting
Property transactions in Taipa registered a marginal fall in the first half of the year, except where a few new projects were launched in the first quarter. Property dealing generally remained inactive over recent months. Approximately 4,800 transactions were registered in the first six months in Taipa, about 6% down year-on-year. Fluctuating external factors and government control of the gaming industry have affected the investment sentiment, resulting in a continuous slowdown of real estate and a fall in housing prices. Compared with the housing prices recorded at the end of last year, the average price in Taipa dropped slightly, by 6-8% in the first half of 2008. The price per square foot for high-end properties was also down by 5%. While transactions are slowing down, leasing prices are going up. At present, it seems to cost less to buy a property than to rent as the mortgage rate remains low and the housing prices have dropped. The continuous inflation and the fickle stock market also suggest that property investment may be the best way out for capital. In the first quarter, GDP reached MOP44.17 billion this year, up 31.6% than 2007. The unemployment rate remained at 2.9%. Macau residents’ monthly median salary topped MOP9,500 and their deposit amount totalled as much as MOP268.2 billion by the end of 2007. All of these statistics indicate a very optimistic, economic growth in Macau. Buying good-value-for-money properties during the current adjustment seems the right thing to do against inflation.

Macau’s real estate market began to slow down the first half of the year with the reasons being attributed to fluctuating external markets and the recent bad weather. A 20% year-on-year decrease was registered in property transactions as well as in property surveying. Ronald Cheung, the CEO of Midland Macau Limited, says that transactions will remain slow until September, when the market expects to see a resumption in sales. The second half of the year may also see a 5% or so decrease in property prices.

Whilst the month of June can be remembered for its continual rainstorms, the stock market also remained fickle and interest rate trends remained uncertain, and early 2008 which led to a 15% drop in housing prices; the latest government data on stamp duty levied property deals show that, up to May, the transaction number and volume stood at 7,673 and MOP18.6 billion, down 34% and 9% year-on-year respectively. The rains in June also delayed some overseas investors visiting Macau and dampened potential buyers desire to look for property, these factors in turn affected the transaction volume for the month. According to Cheung, many potential overseas investors “held back” from making investments in Macau’s real estate market because of the global bearish mood. The property market has now reverted to homebuyers for the time being, many of whom are taking advantage of the falling prices and looking for flats that are “good value for money” to replace their current homes. Second-hand medium-priced properties are likely to be the most sought-after.

While the property transaction market seems to be getting slower, the foreign labour population is expected to rise as tourist amenities such as The Four Seasons Hotel go into operation in the second half of the year. By that time Macau will probably have as many as 100,000 foreign workers, who will activate the leasing market and bring about an increase in leasing deals in spite of the sluggish market. According to Cheung, the current housing prices are still under the influence of outside fluctuating factors, as reflected in the 5-8% downcuts offered by property owners, whereas the property lease prices have remained MOP8-11 per ft² and the volume of leasing transactions has recorded a 10% year-on-year increase in the past six months.

According to Cheung, July and August are the conventional off season for property buyers, whose pent-up consumer desire may be released after summer. The earlier earthquakes in Mainland China and the Hong Kong stock market fluctuation adversely affected the property investor mood as well as the whole investment climate in Macau. However after the summer, potential buyers are expected to release their ‘pent up’ buying power as new housing projects come on to the market, and hence reinvigorate the property market.

The economic boom and flourishing tourism figures of recent years has translated into buoyant personal consumption, with the retail sector most expansive of all. Sio Chong Meng, Managing Director of Lek Hang Property Development Company Ltd, notes that the vacancy rate of stores in the central district is close to zero and therefore an attractive investment.

With Senado Square at its epicentre, the central district comprises Rua de São Domingos, Rua de São Paulo, Avenida do Infante Dom Henrique, Avenida Nova and Avenida da Praia Grande. The area is a tourist magnet as well as a commercial hub. According to Mr. Sio, the district serves the majority of high-end consumers, be they tourists or locals, and as such provides the best guarantee of profits for business operators. The rental and sales prices are correspondingly the highest in Macau.

Take some recent transactions. Store rentals in this district range from MOP300 to 500 per square foot while the sales price for many stores can reach as high as MOP100,000 per square foot. While supply remains limited, such high prices are attractive to established brands and solid companies. Mr. Sio predicts that downtown store prices will very likely keep rising in the foreseeable future, and he believes those stores are a good buy for investors if they don’t mind the relatively low rental return as of now, as they will sell well in the future or serve as a permanent investment that can be bequeathed to later generations.

The rise of the Chinese Yuan (RMB) is leading to the prosperity of retail business in Macau, thus there is a short supply of retail spaces in the main shopping areas. Cheung Yat Fai, CEO of Midland Realty (Macau), expects that as the number of large hotels and residential properties are completed, secondary retail locations will become more sought-after. Therefore, leasing prices of retail space and the number of available spaces for lease will increase by more than 10% this year.

Cheung said that the future of tourism is promising and the value of the RMB continues to increase. Both of these are stimulating the retail market, causing leasing prices and the value of the retailing and commercial properties to grow year by year. Currently, retail spaces located at traditional tourist spots are nearly full. Due to the short supply and the surge of rental prices, some local retailers are moving away from traditional tourist spots to secondary retailing locations.

Manpower Shortage and Transaction Slump

Dennis Lee, District Sales Director of Midland Realty (Macau), said that first-rate retail areas on the Macau Peninsula are mainly located on Rua de S. Domingos, Avenida de Almeida Ribeiro and St. Paul’s Ruins in the Central District. Rental business in the district has entered a period of adjustment. The rental price for first-rate spaces along the main streets is fluctuating around MOP200 per ft2. Due to the leasing rate, which has reached over 90%, only a few retail spaces are available for lease. The shortage of labour is also causing the number of transactions for retail spaces to drop.

Lee stated that according to the Statistics and Census Service, the number of non-residential transactions in 2007 increased by 15% year on year. However, due to the increasing shortage of human resources, the transaction volume did not increase since Q1 of 2007. The transaction volume for Q1 of 2008 reached 1,955 with a value of MOP1.7billion and registering a year-on-year decrease of 41% in volume and 14% in value.

Tight Supply of Retail Property in Tourism District Prompts Demand for Secondary Retail Space

The sales volume of the retail sector of Macau recorded an annual growth of 40% during the Q4 of last year. This was the highest rate recorded by the sector, which has stimulated an increase in the value of the properties and thus store rentals. Dennis Lee pointed out that the tight supply of prime locations available in the Central District and the good prospect of the retail market has caused investors to switch their attention to secondary retail spaces to attempt to gain market share in the retail sector.

The completion of new residential projects within the Areia Preta, Lam Mau Tong (in Fai Chi Kei area), Dynasty Plaza and in Taipa has gradually driven up the demand for secondary retail spaces in those districts as well, with rental per square foot ranging from MOP30 to 35. This is still quite a big difference from the rates charged for stores in prime locations within the traditional tourist district.

Zero Supply of Commercial Buildings - Higher Rate of Return Than Residential

The gaming boom of Macau has been attracting many foreign investors to open branch offices in the city. Data from the Statistics and Census Service showed that there has been a successive increase in the number of new companies since 2001, which has stimulated the demand for office space.

According to Dennis Lee, figures provided by the government indicated an increase of 8.2% in the number of transactions and 36% in the amount over the same period in 2007. The record growth of transaction amounts being the most significant. The tight supply of offices reflects this situation, so property owners are tending to hold onto their properties waiting for a higher rent. Therefore, there was a relatively high increase in the rate per foot.

In fact, most of the designated land grants announced are for the development of residential or hotel projects. Very few of them are to be used for the construction of commercial buildings. As a result, there might be “zero supply” or a “supply shortage” of office space within the next two or three years.

Dennis Lee expects that there will be a “hunger” for commercial buildings to lease when all of the casino and hotel projects are completed in Macau. The present office rental per foot is determined by district - MOP12-13 for those in the Central District and MOP10-12 for the Dynasty Plaza. Prime commercial buildings cost MOP16-22 per foot. Office space sells for around MOP2,500-3,000 per foot, which is still lower than that of residential houses and approximately 5% or above their rate of return.

Due to the increasing number of tourists and foreign workers a demand for quality shops has resulted and thus the retail sector continues to grow. Shop rentals during the first quarter increased by 7.4%, noted by Jones Lang LaSalle in its latest Asia Pacific Property Digest. Marketing statistics indicate that the transaction volume of commercial properties in Macao has declined to a low of 466 in the first quarter while the total turnover was $963 million, which was a sharp decrease of 61.6% and 38.3% when compared to the transaction volume of 1,212 and $1.56 billion during Q1 of 2007.

Jones Lang LaSalle pointed out in its Asia Pacific Property Digest that the growth of the population and tourism revenue would help in strengthening the development of the retail sector over the next few years, thus a number of large retailers were willing to spend a large amount of money on rent to retain shops in favorable locations. An example is a cosmetic store chain that recently renewed its tenancy agreement to rent their property for HKD500 per square foot, which is double the rent of other shops in the same district. In terms of supply, several high-end brand stores and shopping malls, such as the New Yaohan and Shoppes at the Four Seasons Hotel, will open soon.

Investors Shift to Residential Areas
According to another marketing statistic, the square footage of a number of shops in the Macau Ginza Plaza ranges from 191 to 650 square feet and were leased a month ago with the monthly rentals between $7,800 and $36,800 or $23 to $68 per square foot. For instance, the monthly rental of a 483-square-feet shop is $31,300, equivalent to $65 per square foot; furthermore, the monthly rental of a 2,791-square-feet shop on the ground floor of China Plaza - Concordance Court is $80,000, equivalent to $29 per square foot.

Since the prices for prime shops have reached a certain level, investors recently have shifted their speculation strategy from prime shops in prosperous business district to residential areas. One example of this trend is a shop on the ground-floor at Pak Lai Garden with the area of 1,383 square feet was recently sold for $13 million, an average of $9,400 per square foot; another example is the ground-floor shop at Weng Seng Garden with the area of 4,200 square feet was sold for $32 million, an average of $7,619 per square foot; In addition, two ground-floor shops that are connected at I Keng Kok that were 2,100 square feet were sold for $13.14 million, an average of $6,257 per square foot. Commercial real estate experts expect that the domestic demand will further trigger transactions with even higher prices for shops in residential areas by 10% over last year.

Property Market Is Expected to Rise
According to Asia Pacific Property Digest by Jones Lang LaSalle, the capitalization of high-end residences grew by 11.9%. Several new buildings recently went on the market and have recorded respectable sales volumes, for instance, over 93% of the 120 residences at Phase II of The Praia sold out for amounts between HKD3,500 and HKD4,700 per square foot; 75% of the 80 residences at La Cite, Pérola Oriental District, were sold at an average price of HKD3,500 per square foot; residences at The Residensia Macau, Pérola Oriental District, are priced between HKD4,000 and HKD5,500 per square foot; 75% of the 196 apartments at The Buckingham, Taipa, sold for an average of HKD5,000 per square foot. Since there weren’t any high-end apartments in the market during the first quarter, this drove the capitalization of high-end properties to rise by 11.9%.

In terms of the rental market, it has continued to follow the continued demand of foreign employees in Macau and owing to the supply shortage has caused the rents of high-end properties to continue to increase by 6.9% during the first quarter. “It is expected that the capitalization of high-end properties will continue to rise in the coming year. Moreover, a large number of foreign employees are attracted by the flourishing labor market and this will also help drive the demand for high-end properties and maintain the growth in the price of rentals.”
 

Midland Macau Limited is optimistic about the property market in Zhuhai, and has expanded its business to the city. It is the first company to be introduced to Zhuhai through the Macao Trade and Investment Promotion Institute (IPIM).  They set up the office with the assistance Zhuhai’s Foreign Trade and Economic Cooperation Bureau.  The Zhuhai operations began at the end of 2007. It has since been expanded and currently operates three branch offices in Gongbei, Jida, and Xiawan in Zhuhai city.

Ronald Cheung, CEO of Midland Macau Limited, pointed out that Macao is Zhuhai’s neighbouring city and has seen a continuously bullish property market in recent years. With high-end properties taking the lead, Macao’s real estate sector has reversed its past trend and attracted the attention of many investors and overseas funds, and thus revived the city’s property market and gave impetus to its economic growth.

Zhuhai, which is on the other side of the border of Macao, has also experienced a big economic growth in recent years. Its tremendous potential is given rise too by the construction of large infrastructure projects such as the Hong Kong-Zhuhai-Macao Bridge, the Guangzhou-Zhuhai Light Rail and the Guangzhou-Zhuhai Railway. Moreover, the city is in fact in the “one hour residential sphere” with its neighbouring cities. More and more business and ordinary people are expected to visit and live in the three communities in the future. The appreciation of the RMB gives further impetus to Zhuhai’s real estate boom. Seizing those positive factors, the Midland Realty (Zhuhai) believes that now is the right time to enter Zhuhai’s real estate sector. It hopes to bring Zhuhai further in line with international practices by introducing investment capital from Hong Kong and Macao, and even Southeast Asia, Japan Europe and America, relying on its years of experience in real estate intermediary business.

Aside from seizing market opportunities and introducing more foreign capital to Zhuhai, Midland Realty (Zhuhai) also aims at developing Zhuhai as another investment channel for Hong Kong and Macao investors. According to Peter Hon, Regional Managing Director of the Midland Realty (Zhuhai), alongside the recent boom of Macao’s property, many Macao residents have sought to buy property somewhere near the Gongbei Border such as Xiawan and Jida in Zhuhai, mainly for investment as well as for residential purposes.

Statistics show that of the new property owners in Zhuhai last year, some 1,400 are Macao citizens, accounting for 14% of the total market. Around MOP1 billion was invested into Zhuhai’s property market. There was an 18% increase year-on-year in the number of Macao residents becoming owners of property in Zhuhai. It is believed that this trend will continue to rise, and as such, Zhuhai will serve as the “buffer zone” for the overheated real estate market in Hong Kong and Macao, and ease the pressure of the limited property supply in both cities.

Developers believed Zhuhai’s property market will benefit directly from the planned Hong Kong-Zhuhai-Macau Bridge, and the market has recently resumed a rising trend in Q1, backing up developers’ confidence in launching new projects. Recently, Dantin Group commissioned Midland Realty (Zhuhai), a Zhuhai based developer, to be the broker of the upper-storey harbour-view flats of the Bayview Villa Phase 2 project.

According to Tony Leung, Regional Director in Zhuhai of Midland Realty, as infrastructure projects (Hong Kong-Zhuhai-Macau Bridge, Guangzhou-Zhuhai Light Metro Transit System, Guangzhou-Zhuhai Railway and Pearl River Delta Highway) gets underway; the increasing flow of people and goods in Zhuhai is beginning to have a positive impact on the economies of Zhuhai, Hong Kong and Macau. Because of this positive impact, the potential value of property investment in Zhuhai is enhanced. In view of the fact that Macau is only a checkpoint border away from Zhuhai, coupled with the rising value of the RMB, and with the soon to be implemented 24-hour border, Macau citizens may like to purchase properties in Zhuhai for their own purposes, which may cause Zhuhai’s property market to increase further. 

According to Leung, the flats located at Phase 2 of Bayview Villa, at no. 201, North Qinglu Road, which his company is commissioned to promote, are upper-storey full harbour-view flats reserved by the developer, priced at RMB1,050 or more per ft2. Leung added that the flats were much favoured at the initial promotion. Recently, in an optimistic mood about Zhuhai’s property market, a Hong Kong buyer purchased a 2,247 ft2 deluxe decorated lower-storey show flat at RMB2.92 million through the dealer, as long-term investment as well as for leasing, which is expected to yield a return as high as 0.5% monthly.

The Residencia - developed by San You Development Ltd. - overlooks the waterfront and will be launched soon. The developer recently launched an initial promotion for this project and plans to host a trade fair at Phase 1, 5th Floor, Pacific Place, Admiralty, Hong Kong on 17th and 18th May (Saturday & Sunday), from 2:00pm to 5:00pm.

Marketed as an integrated project, The Residencia is located at Areia Preta and is adjacent to the landing site of the proposed Hong Kong-Zhuhai-Macau Bridge. San You Development Ltd claims over 100 apartments have been pre-sold during the internal VIP subscription in March, with the highest price reaching $6,000 per square foot.

Property sales in Macau registered a sharp decline in transactions in the first quarter with the total number or transactions totally around 4,000. It is estimated to be a decrease of 30% as compared to that of the same period of last year. Although transactions have dropped, real estate agents claim that property was sold at higher prices, indicating the bullish prospect of the property market.

According to Wong Hio Weng, Sales Manager of Centaline (Macau) Property Agency Ltd (Nova Taipa Branch), foreign investors appeared to be less confident recently and as a consequence property sales slightly declined in the first quarter – property transactions in Taipa decreased by 10% to 15% in comparison to the same quarter last year, a direct affect of the sub-prime mortgage crisis of America and the current slump in the Hong Kong stock market. He pointed out that in spite of fewer transactions, property prices continued to rise. For example, the 800-square-feet small residences with two bedrooms located in Nova Taipa Garden are significantly favoured by homebuyers due to their high quality usable partitions and profitable return, of which the property prices climbed up from $2,300 and $2,400 per square feet last year to the current $2,800 per square feet, an increase of nearly 20%.

In terms of the tenancy market, property owners are standing their ground regarding the rentals while investors mostly take a wait-and-see attitude. A second-hand small flat with two bedrooms in Taipa area currently rents for $6,500 to $6,800 on average, an increase of 18% over the $5,500 of last year. Rental returns are as high as 0.4% to 0.45% per month.

Wong added that fewer transactions have been made recently because investors are waiting for another round of buying opportunities. In the second half of this year, and apart from Praia Grande, more residential projects will be completed and up for sale. Developers of the Taipa Wai Lung Road Project and Windsor Arch have successively declared that their properties will be on the market in the third and fourth quarters, which will add to the active property market. It is estimated that the new properties will once again target investors. Driven by the new properties, it is believed that property transactions will soon be growing in the second half of this year.

The property market is on a tear, thanks to booming demand and the release of a few new high-end projects

On a February afternoon, more than 50 reporters gathered at a press conference held in the JW Marriott hotel, Hong Kong. They were there not merely for the presence of local pop TV star Bernice Liu, but to witness the launch of The Buckingham, Macau’s supposed “first six-star residential property”. As the first residential project to be unveiled this year, the Buckingham is expected to take Macau’s property market up another level.

And by this, we mean not just the quality of the furnishings. Prices for luxury properties are, pardon the pun, going through the roof in Macau right now. Stories circulate constantly of entire floors being released into the secondary market at projects such as One Central and One Grantai at twice what was paid for them by early-bird investors who jumped in less than a year ago. Even at the Buckingham, prices are nearly 50 percent higher than what buyers at the next-door Manhattan paid fewer than six months ago.

That said, quality may well turn out to be the defining factor at the top end of the market. The Buckingham, though not yet finished, promises to be a classy place to live. The 50-storey residential tower is located close to the Cotai Strip, containing a total of 184 units with sizes ranging from 1,000 sq ft to 2,288 sq ft, and nine duplexes of more than 3,000 square feet. It has a two-storey clubhouse facility, Royal Clubland, that includes a yoga studio, spa, swimming pool, gymnasium, reading corner, children’s outdoor playground, wine and cigar bar, and more.

According to Pun Wai Man, chairman of Wai Heng Construction (developer of The Buckingham), prior to its launch the project received more than 100 sales inquiries from multiple parties showing intense interest. It helped, of course, that on February 19, The Buckingham struck an institutional deal with Marriott Vacation Club International which has agreed to purchase five consecutive floors comprising 30 units of the property. Pun declined to reveal the amount paid by Marriott but said that he expects the average price of The Buckingham will climb well above MOP6,000 per square foot.

The Buckingham is certainly following in illustrious footsteps. One Central, the project run by Hongkong Land and Pansy Ho, situated “in the center of it all” (as its TV ad stated) is probably still top of the pile in Macau, fetching prices in the secondary market of more than HK$8,000 per square foot. One Grantai, located on a hill overlooking Cotai, is fetching more than HK$7,000 per square foot.

What else could be driving prices, besides the chandeliers painted into the brochures these projects hand out, some of which show backdrops of Las Vegas? Well, it certainly helps that there has been a freeze on construction permits for new projects ever since Ao Man Long, the former secretary for development, was taken down by graft-busters two years ago. Already, the market has seen a casualty in the shape of xxx, which pulled out of its project in Nam Wan Lake area just as this magazine was going to press. That may be bad news for government officials responsible for foreign investment, but it’s music to the ears of property developers, as future growth in supply will be pushed that much further out.

The continued suspension of the government’s Fixed-asset Investment Residency Policy, which had previously allowed a wave of mainlanders to obtain residency in Macau through property purchases, hasn’t hurt, either. So 2008 looks to be a buoyant year – for those lucky enough to get their hands on a new unit, most of which sell out within weeks of going on sale.

“The property market in Macau will remain buoyant this year,” says Rico Kwok, managing director of Centaline (Macau). “Thanks to the three new large-scale projects – The Residencia Macau, the Avenida Wai Long Project and the Windsor Arch – that are going to be launched before mid-2008, an additional 1,000 new residential units will be added to the market.”

Looking at the bigger picture, the optimism remains for projections going further out. Research conducted by Jones Lang LaSalle indicates that an estimated 19,256 residential units will be coming onto the market between 2008 and 2010, averaging 6,419 new units per year. More than 70 percent are for the mass residential market; the luxury residential market only accounts for 30 percent.

On the demand side, there is reason for optimism, too. As Rico Kwok says, there is real money in the market. “Currently, the per capita GDP in Macau has already exceeded Hong Kong; the unemployment rate is close to zero. If you have a stable job and don’t have to worry about being laid off, you’ll naturally consider buying property or upgrading your current residence. These factors will keep the property market strong.”

Centaline (Macau), for example, recorded more than 32,000 transactions in 2007, two-thirds of which were for residential properties. The agency’s commission revenue has doubled in the past three years, reaching a total of MOP88 million last year.

Dan Tagliere, co-founder of MacauLand, agrees that although Macau’s property market has not fully matured – the software is yet to catch up with the hardware – prices will continue to surge. “The gaming and hotel industries alone will create 93,000 new jobs over the next three years, including a large percentage of mid-income to high-income foreign management staff. These expatriates are accustomed to certain living standards and many existing residential units are not good enough to meet their requirements. That’s why developers here are all competing to feed the market with more high-end properties.”

He should know better than anyone where the demand is coming from, because his first project, The Manhattan, is already open, and pulling in the cream of the crop of new managers coming in for projects such as Cirque du Soleil and the Four Seasons, both of which open mid-year. The Manhattan has a great clubhouse, complete with a gym, pool, golf driving simulator, kids’ playroom and its own small cinema, and rents are, unsurprisingly, rising strongly, too.

According to Tagliere, the owners of Manhattan’s 175 units come from all over the world, including institutional investors and individuals. Ten to 15 percent of the units are owner-occupied, while others are in the leasing market. Currently, more than 75 percent of all Manhattan’s units have been leased and Tagliere believes that the rest will find tenants by the end of 2008. “Many wonder who is going to occupy all these high-end residences, but the thing is you have to build forward and then give it six or eight months before they are absorbed by the market. The problem now is not that we are building too many but that there aren’t enough being built.”

The market is not without risks, however. There is always uncertainty around the definition of “luxury”, for instance. “Many developers tend to apply the word ‘luxury’ to all of their projects while the property is only medium-end at best,” says Franco Liu, head of Savills’ Macau office.

Investors should also be reminded that when it comes to buying properties, both hardware and software matter. For example, who will be managing the property? Currently, Macau’s luxury property management market is largely divided between the two international giants, Jones Lang LaSalle and Savills. The former is managing Lot W, a high-end serviced apartment in Taipa, while the latter operates The Manhattan. Liu says that the property market remains strong and this year the price per square foot of a so-called “luxury property” should reach MOP7,000 per square foot – still cheaper compared to the high-end residential market in Hong Kong.

The strong growth of the gaming industry is driving a buoyant property market, and it is no surprise that plenty of foreign investors are optimistic about the future of Macau. Recently, Engel & Voelkers (E&V), Germany’s leading real estate agency, has also made plans to enter the Macau market. “In Europe, especially in the finance and banking sectors, many are keen to enter this nova market, yet few can find the breakthrough point. They would like to have a property agent whom they can trust, and that’s exactly why we are here,” says Sandra Roth, director of business development, E&V Asia-pacific.

With 30 years of international marketing experience, E&V’s expertise is in the leasing business of high-end residential properties. E&V entered the Hong Kong market at the end of 2006 by seeking local firms to buy its licenses or franchise to establish outlets in upmarket locations. And now, the aggressive agency has its eyes set on the neighboring market – two new branches are scheduled to open in Macau within 2008. A one-off licensing fee of ￡27,500 is required in order to become E&V’s partner and benefit from its global market mega database, clientele network, sales, PR and staff support, along with access to E&V’s IT platform.

“Unlike Hong Kong, Macau’s property has not yet reached its maturity, which allows more room for further development. We want to take the opportunity and stay ahead of the competition, offering our local clients a new level of services with an international flair,” says Roth.

While a feel-good atmosphere is dominating Macau’s property market, David Faulkner, the regional director of Valuation & Advisory – Asia, Colliers International maintains his reservations. “The upward trend in the property market largely depends on foreign investment, and a lot of it is based on speculation. Looking at these newly-launched luxury properties, one can’t help but ask: who will be living there? It’s difficult to tell how many new units the market can absorb.”

Faulkner does not agree with the common Macau-Las Vegas analogy either, for Macau has several congenital deficiencies that can hardly be overlooked. “Macau has its physical limitation and a small local population. Unlike Las Vegas, it can’t be expanded into the desert. The local economic system is gaming-dominated, which is unlikely to change (though its percentage might change slightly). Some say that the gaming and hotel industries create enormous job opportunities – but don’t forget that most of the imported labor force will be low-income workers. How many of them will be categorized as high-income? And moreover, most visitors are here to gamble, which makes you wonder how many of them would be willing to have a weekend home here?”

Faulkner believes that the property market in Macau has almost reached its demand-supply balance and the growth of luxurious residential units is limited. “When all these projects are completed there is going to be competition and our opinion is that in certain segments of the market there is going to be overdevelopment. As an investor you want to be sitting on assets that you know will shift.”

Nine to five

The commercial property market in Macau is much smaller than the residential. Grade A office buildings are clustered in the CBD around the Lisboa, namely Macau Bank of China, AIA Tower, Macau Square and the Finance & IT (FIT) Center, which has recently begun accepting applications for lease. The lower grade commercial buildings are mostly located in the Dynasty District.

Gregory Ku, managing director of Jones Lang LaSalle (Macau) says that aside from the FIT Center, there is no new commercial property project joining the lineup in the foreseeable future. Some suggest that the New Yaohan and Jai Alai Complex will be reconstructed with the addition of office space, but a detailed development plan has not been confirmed.

At present, though the occupancy rate of Grade A office buildings is more than 90 percent, Macau still has a total vacant commercial property space of more than 1.7 million square feet. The main reason for this is that the casino groups house most of their staff in on-site offices. However, with the development of service sectors such as banking, finance, accounting, law, telecommunications and information technology, more companies in the support industries for the casinos are setting up branches in Macau. Unsurprisingly, rents are already rising strongly at the top end of the market.

Ku stresses that Grade A office buildings in Macau are yet to catch up with similar properties in Hong Kong in terms of facilities. The new FIT Center boasts a 12,000-square-foot luxury clubhouse, spa and massage service, gymnasium, café, and multi-function room, and will be clearly the No.1 commercial property in Macau. The average leasing price is estimated at over HK$22 per square foot.

Ku believes that most companies servicing the Macau casino groups still choose to base their headquarters in Hong Kong, and due to the proximity and convenient transportation between Hong Kong and Macau, even if companies do set up branches in Macau, they won’t necessarily be looking for anything plush.

Tips and traps

Gregory Ku, managing director of Jones Lang LaSalle Macau, says aspiring property investors should first consider their budget and then the location. Taipa is regarded as the most promising area for real estate investment, with newly developed residential projects including Nova City, The Manhattan and The Buckingham (all with club house facilities). On the peninsula, Pearl District is a fairly good choice.

Yet according to Ku, investors should be reminded that Macau adopts the Continental Law system, making it different from the Common Law system in Hong Kong. The buyer-seller contract is relatively simple, and the local government has not imposed any regulation on the sale of off-plan property, so investors need to be extra cautious.

In addition to the property transaction price, the buyer needs to pay an extra two percent in attorney fees, 3.5 percent of government stamp-tax, and the transaction commission to the real estate agency. Moreover, buyers must pay a 16.8 percent property tax to the government if they wish to put the unit on the leasing market.

In an attempt to encourage further development of the property market, the government plans to offer local residents a 90 percent mortgage. And if the capital value of the property purchased is more than MOP3 million, the stamp-tax will be exempted.

Home Buying Workshop Enthusiastically Received

Everybody craves a home of their own, and buying a home turns out to be one of the biggest events in one’s life. Many people leave this transaction to be taken care of by real estate agents. But how can you be a savvy consumer if you know very little of what is involved in your multi-million dollar deal, knowledge of the things involved in the deal will help you smooth out the buying process and ensure that your purchase is conducted professionally.

The laws concerning property transactions are publicized by the Legal Affairs Bureau via newspaper, radio and television. A leaflet entitled Tips on Property Transaction was distributed at all Legal Information Stands, introducing the general procedures of a property transaction. In addition, a workshop entitled “Better Approaches to Property Buying” was held to explain the procedures involved in property transactions, including the documents involved such as the Land Register, promissory agreement, tri-party agreement, pre-completion property sale, power of attorney, stamp duty on property transfers, one-stop service, and miscellaneous paper work. In response to the enthusiastic citizen participation, the Bureau has decided to host three more workshops instead of the one originally planned in consecutive two-week periods to meet the needs of the citizens. Local residents are obviously interested in knowing and understanding the regulations and procedures concerning property transactions. The four workshops attracted over 240 citizens, where participants not only listened carefully to the clear and simple explanation by legal worker Ms. Leong Chi Kun, but also actively raised questions and held discussions of real cases, in an interactive and relaxed atmosphere.

In May, the Legal Affairs Bureau will publicize the tenancy laws. Interested parties should look for related newspaper notices or visit the Legal Affairs Bureau’s website at www.dsaj.gov.mo for further information.

Macao’s economy is currently growing rapidly. The increases in residents’ incomes and the number of foreign employees have driven the demand for housing. Real estate developers are also visualising the potential of investing in Macao due to the fact that the construction of the Hong Kong-Zhuhai-Macau Bridge will launched by the end of the year, which will further trigger a steady increase in property prices. Some property industry professionals have predicted that the property prices in 2008 will increase by up to 40% instead of the previously anticipated 25%.

The Executive Director of Centaline (Macau) Property Agency Limited, Kwok Chiu Lung, revealed that the number of property transactions had remained the same during Chinese New Year as residents and investors often spend the holidays outside Macao. However, the supporting capabilities in the market are strong and a bubble effect is yet to appear. Presently, the property market is still in a healthy condition while the prices have not been severely affected by the sub-prime crisis. He also believes that regional factors will have more influence on the real estate market than global factors. The development of Macao’s economy is maintaining a good momentum and the sub-prime mortgages in US have only had a slight impact on Macao’s housing market, therefore the adjustment in property prices will only last for a short time and will not have a great impact. 

He added that due to the effects of the linked exchange rate system, banks in Hong Kong and Macao will follow the US in further lowering interest rates on deposits. Residents tend to be eager to undertake financial planning and investment when inflation is favourable for them to do so; however the Hong Kong stock market still remains unclear due to the sub-prime crisis, which has shaken investor confidence. It is therefore expected that residents will withdraw their capital from the stock market and reinvest in the relatively stable property market.
 
In recent years, the property market of Macao has kept good momentum and it is possible it will become a ‘harbourage’ for their capital and may subsequently drive the increasing demand in housing. Moreover, some provinces and cities in Mainland China suffered from snowstorms earlier this year and the central government may slow down the macroeconomic adjustments as a control measure in order to speed up reconstruction work after the big chill, which injects an additional favourable factor into the Hong Kong and Macao property markets. Furthermore, the luxury property prices in Macao are at a relatively lower level in comparison to the global market, therefore there is still a mark-up gap. Kwok also has high hopes for the future of the property market in Macao and thinks that prices will increase by up to 40% instead of the previously anticipated 25%.