High-end Property Prices Halve: Investors Leave Market from Square One

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.