70,000 Owners Likely to See Their Properties Become Negative Assets

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.