Real estate agency JLL Macau believes that the Macau property market will “finally see the end of the tunnel” in 2023 and suggests that the authorities adjust the current price control measures in place for residential housing
In its usual annual analysis of the real estate sector in the Macao SAR, JLL Macau points out that the volume and values of sales and rentals of local real estate should finally recover in 2023.
“Having been seriously hit by the pandemic in recent years, Macau’s real estate market is expected to recover with more residential lease transactions expected after the reopening of borders,” said JLL Macau and Zhuhai General Manager Oliver Tong.
“However, interest rates are likely to remain at an elevated level in the short term, while unemployment and underemployment rates will not improve overnight.”
Around 2,950 residential properties were sold in 2022, half the sales volume recorded in the previous year, and without a single residential project to be launched last year.
In 2022, pre-sale licenses were issued to a total of 971 new residential properties, representing a total area of 63,592 square meters.
Both property values and residential rental values continued to fall in 2022, with rental values for luxury and middle class residential properties falling by 15.5 percent and 12.8 percent, respectively.
According to Mark Wong, Director of Consulting and Valuation Services at JLL Macau, with the increase in confidence in the sector and interest rates (highest point), the residential and commercial sectors of the real estate market should register a recovery.
Interest rates in Macau and Hong Kong recently reached the highest value in 17 years, with the Monetary Authority of Macau announcing a new rise in the main reference interest rate to 5 percent.
“Prospects for the real estate market will continue to be subject to interest rate values and the speed of recovery of Macau’s economy”, says Wong.
Little private offer
“In the private market, two new developments located in Taipa and Coloane, representing around 850 units, obtained a pre-sales license last year”, points out Oliver Tong.
However, the director general of JLL pointed out that public housing projects will dominate the offer in the real estate market in the future, including affordable housing projects for the middle class – known as the ‘sandwich class’ – and the New Neighborhood of Macau on the Island of the Mountain, projected to be launched this year.
With shops, a kindergarten, a primary school, a health center, an old people’s home and a community service center, New Macau District in Zhuhai Municipality is designed to serve around 4,000 housing units for Macao residents. .
At the same time, JLL Macau points out that around 35,000 public housing units will be available in the future.
Despite predicting a certain impact, the real estate agency believes that units like the expected ‘sandwich class’ will not be a direct competitor for the middle and upper class market.
According to JLL Macau, the volume of residential transactions fell by 80 percent compared to 2010, following a series of measures to slow down the real estate market.
The managing director of JLL Macau suggested that the Government consider adjusting any remaining cooling measures depending on the current market situation.
“These deceleration measures were launched about 10 to 12 years ago […]. At that time, I don’t think anyone could have predicted Covid and its impact. In the old days, I believe they were necessary, but now the world is very, very different. In terms of price and volume of transactions, we are at a very low level”, highlights Tong, adding: “I think it’s risky if they continue for a long time, and this harms everyone’s wallets. I think it is time to at least rethink or readjust these measures.”
In front
The agency also indicated in its analysis that the commercial real estate sector should be at the forefront of the recovery expected for 2023.
In 2022, there were 357 transactions for the sale of commercial properties, a decrease of 9 percent year-on-year, with rent values having decreased by 15 percent compared to the previous year.
Income generated by commercial properties stood at 1.9 percent by the end of 2022, with few luxury commercial property transactions registered.
As for 2023, the real estate company believes that the recovery in visitor volume in the city after the reopening of the border was faster than expected, and a “significant recovery” is expected in the commercial rental market.
“Inquiries for top-notch retail outlets near tourist areas increased significantly shortly after the reopening of the border, particularly local merchants who sell souvenirs or operate pharmacies,” says Tong.
“Commercial leases have recovered to around 50 percent of pre-pandemic levels. Large trade groups have taken a wait-and-see approach and watch market conditions for a few more months before making any expansion decisions as there are still issues such as labor shortages and rising costs.”
As for the office space real estate market, in 2022 a total of 4,111 new developments were registered in Macau, 24.3 percent less than in the previous year.
JLL Macau attributed part of the drop to the pandemic and the contraction of the gaming sector’s VIP market, following the closure of the largest VIP gaming promotion companies.
The number of office transactions also dropped by a third to 100 in 2022, as the transaction value was reduced by 33.5 percent year-on-year to MOP710 million.
“Macao’s office rental market was very weak, with an increasing vacancy rate in 2022, as the local economy was severely hit by the pandemic and government authorities gradually left rented offices in the private market”, points out Matt Lou , Senior Lease Manager at JLL Macau.
