Property Leasing Goes Up While Property Prices Fall by 5%

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.