“2018 will be a year of stability for Macau’s property market“. So anticipates Jeff Wong of Jones Lang LaSalle (JLL) in Macau, who addressed an audience of inter-chamber members and their guests at this year’s kick off business lunch events for the American Chamber of Commerce in Macau, British Business Association of Macau and the France Macau Chamber of Commerce.
Wong summarized the key elements impacting Macau’s residential market: the negatives being insufficient land supply, policy uncertainty and possibly higher interest rates and on the positive side, continued economic growth.
An economist and chartered surveyor by background, involved in real estate for the past 20 years, Wong specializes in investment and project sales and residential marketing consulting. Currently National Director of Capital Market, for JLL Macau, his presentation included a number of fascinating statistics to support his proposition.
Firstly, whatever anyone says, the perception of whether Macau is doing well or badly is all driven by the gaming revenues and how it in turn has an impact on the property market. From February 2014’s high of MOP38B Wong’s figures highlighted the following nose-dive slump to MOP15.9B in June 2016 which then picked up for a recorded 17 month year-on-year growth in a row to MOP22.7B in December 2017. So there’s definitely a ‘feel-good’ factor that’s come back in the market as a result. The approximately 10,000 residential sale transactions in 2017 were up slightly from 2016 and almost double that of 2015. By 4Q17, the capital value and rental value of high end residential properties was up 8.8% and 8.4% year-on-year respectively, whereas capital and rental value figures for mass and medium residential were up 5.7% and 8.1%.
The wealth of the Macau people continues to grow; median income of Macau local residents is MOP19,000 per month today, up from under MOP18,000 per month for the previous 2 years (and interestingly MOP9,000 in 2008). Unemployment of less than 2% has remained stable for the past 6 years and the numbers of imported workers has stayed consistent for the past 3 years at around 180,000.
Changes of affordability of property over the past 6 years were examined, comparing 2012 with 2017. Wong’s figures show that the median income is up 46%, but average house prices are up 51%, with properties getting smaller (average net areas reducing by 11%), and prices per square foot going up an average of 70%. The amount of down-payment required by buyers is up 97%.
Some fascinating price-income ratio comparisons in the Pearl River Delta were provided; Wong illustrated that Macau’s property is still considerably cheaper than its sister cities, with an average payback of 19 years in Macau, 29 years in Guangzhou, 38 years in Hong Kong and 39 years in. Having said that, Macau’s price-income ratio is still up by 73%. Hong Kong (West Kowloon) is up 12%, Shenzhen and Guangzhou have both over doubled.
4,313 new residential units were completed between January and November 2017. Pre-sale residential transactions were mostly within the bands of MOP6-9M and MOP12-14M. Overall residential sales transactions for the year showed that the majority were priced at between MOP3-6M
Looking at the prices for the different types of buildings, high-rise against low-rise, the majority of transaction sales were between MOP6-8M and between MOP3-5M, respectively.
Size of properties being bought are smaller; back in 2011, the number of transactions, for buildings under 5 years, including pre-sale, were for an average size unit of 1,130 sq ft. Today the average size unit purchased is about 840 sq ft.
The size mix of new builds has changed dramatically. For the 5 years between 2009 and 2013, of the number of units under construction, 15% were studios, 12% 1-bedroom, 44% 2-bedrooms and 24% 3-bedrooms. After 2014, new build studios ballooned to 52%. 1-bedrooms stayed fairly constant at 16%, but 2-bedrooms and 3-bedrooms dipped to only 14% and 8% respectively. Studios and 1-bedroom units now make up over 68% of new builds.
The implications of this on Macau’s future demographics will mean less extended families living together – or if they are, it’s in the older properties. It is anticipated that more local singles and newly married couples will be taking up the new build studios and 1-bedrooms. The challenges will be that a) with the bank mortgage loan restrictions whether they will be able to afford to buy new and b) when they start having a family will they will be able to trade up to a larger unit of the same quality, or have to move back to older more affordable homes.
What of the future supply of residential units? For this year and the next two, studio and 1-bedroom units will continue to make up over 75% of the new supply. For the next 3 years experts consider that there is enough new property coming on the market to meet demand. However beyond that, they note that there is insufficient in the pipeline, which could lead to rising prices again.
At the end of Wong’s presentation several comments were made from the floor. One addressed the lack of future supply suggesting that the government should focus on supporting urban renewal programmes, and building maintenance and renovation subsidies for the older properties. Another commented on the restrictions on mortgage loan ratios that make it extremely tough for first time buyers to have the required funds to afford their own housing. Again it was proposed that this segment of the buying market be given assistance through more favorable loan terms.