Macau's housing market is weakening
Lalaine C. Delmendo | November 23, 2019
Macau's housing market is now cooling rapidly. Slower economic growth in Mainland China and the civil unrest in Hong Kong are hitting Macau's gaming and propertysectors.During the year to Q2 2019, the average transaction price of residential units in Macau rose by a modest 2.5% to MOP 110,263 (US$13,611) per square metre (sq. m), according to the Statistics and Census Service (DSEC). This was a sharp deceleration from the double-digit price increases from late-2016 to early-2018. When adjusted for inflation, prices fell slightly by 0.2%.
Figures from global real estate firm JLL showed that values of high-end and mass-to-medium residential properties in Macau fell by 3.5% and 1.8%, respectively, in H1 2019 from a year earlier.
Both demand and supply are plummeting. InH1 2019, residential property transactions in Macau fell by 38.6% y-o-y to 4,104while transaction values plunged 42.1%.
Residential completions fell sharply by 92% to just 104 in H1 2019 compared to 1,251 in H1 2018. Similarly, residential permits dropped 86% to 134 in H1 2019 from 945 a year earlier.
Locally, residential property price movements are mixed.
- In Macau Peninsula, the historic center of Macau, the average transaction price of residential properties rose by 6.45% y-o-y to MOP 109,987 (US$13,577) per sq. m. in Q2 2019. However only 5 of the 17 areas where figures are available saw house price growth.
Fai Chi Kei registered the biggest house price increase in the island of 18.5% during the year to Q2 2019, followed by Horta Costa & Ouvidor Arriaga (16.3%), and NATAP (12.8%). In contrast, huge price falls were seen in Baixa de Macau (-17.22%), ZAPE (-15.78%), NAPE e Aterros da Baía da Praia Grande (-10.93%), Barra/Manduco (-10.52%), andGuia (-8.18%).
- In Taipa, where there are many hotels, casinos, and shopping malls and which is home to the Macau Jockey Club racecourse, residential property prices surged 12.43% to MOP 101,515 (US$12,531) per sq. m. during the year to Q2 2019. House prices rose in Cidade & Hipódromo da Taipa (33.39%), Jardins do Oceano e Taipa Pequena (13.86%), Baixa da Taipa (13.04%) andUniversidade & Baía de Pac On (7%) but declined in Pac On & Taipa Grande (-6.39%).
- In Coloane, home to two of Macau's best beaches - Cheoc Van and HacSa, residential property prices fell slightly by 0.3% y-o-y to MOP 128,871 (US$15,908) in Q2 2019.
NATAP, located in Macao Peninsula, has the most expensive housing, with an average transaction price of MOP 146,481 (US$18,082) per sq. m. in Q2 2019. Coloane has an average price of MOP 128,871 (US$15,908) per sq. m; Fai Chi Kei, MOP 119,410 (US$14,740) per sq. m.; Móng Há & Reservatório, MOP 118,886 (US$14,675) per sq. m.; and Cidade & Hipódromo da Taipa, MOP 117,755 (US$14,536) per sq. m.
Macau's property market is expected to slow further in the coming months, as various local and global events have adversely impacted both domestic and foreign demand. The recent implementation of property speculation cooling measures in Macau, coupled with the ongoing US-China trade war, capital controls in China, and the civil unrest in Hong Kong, are now weighing on both the housing market and the wider economy.
Macau's economy is expected to contract by 1.3% this year and by another 1.1% in 2020, following expansions of 9.7% in 2017 and 4.7% in 2018, based on IMF estimates.
Analysis
of Macau Residential Property Market »
Income taxes are low in Macau
Rental Income: Rental income is taxed at a flat rate of 10%.
Capital Gains: Capital gains are subject to complementary tax which is levied at progressive rates, from 0% to 12%.
Inheritance: Inheritance and gift taxes in Macau have been abolished.
Residents: Resident are taxed only on their income from sources in Macau.
Transaction costs can be high in Macau
Total transaction costs can rise up to 33.65% of the property value depending on the circumstances. If the property was acquired on or after 14 July 2011 and resold within two years of acquisition, the seller is liable to pay Special Stamp Duty (SSD) from 10% to 20% of the property value.
Macau’s economy expected to slow
During the first half of this year, Macau's economy contracted by a total of 2.5% from the same period last year.After expanding by almost 17% per year from 2010 to 2013, Macau suffered a three-year slump in 2014-16 (with 2015 registering a whopping 21.6% decline), after its main industry - gaming activities - took a major hit from China’s anti-corruption campaign.
Fortunately, the economy bounced back strongly in 2017 and 2018, with GDP growth of 9.7% in 2017 and another 4.7% in 2018, buoyed by massive infrastructure investments and booming tourism.
In the first three quarters of 2019, gross gaming revenue for Macau casino operators amounted to MOP 220.93 billion (US$27.27 billion), down by 1.8% from a year earlier, according to the Statistics and Census Service (DSEC). This was in sharp contrast to y-o-y growth of 14% in 2018 and 19% in 2017.
VIP gross gaming revenue fell by 22.5% y-o-y in Q3 2019. VIP gaming revenue accounts for about 44% of all casino gaming revenues.
In contrast to the gaming industry, tourism remains robust. In the first three quarters of 2019, the total number of visitor arrivals in Macau surged 17% to 30.2 million people from the same period last year, following annual growth of 9.8% in 2018 and 5.4% in 2017, according to the DSEC. Tourism benefited from the recent opening of the Hong Kong-Zhuhai-Macau Bridge. About 71% of the visitors in the first three quarters of 2019 came from Mainland China.
Macau’s economy is expected to contract by 1.3% this year and by another 1.1% in 2020, based on IMF estimates.
The unemployment rate was 1.8% in Q3 2019, unchanged from a year earlier.
In August 2019, Ho Iat Seng, former president of the Legislative Assembly, was elected Chief Executive of Macau, receiving 98% of the total votes (392 of the 400 members of the Electoral Commission). Ordinary citizens have no direct say in the appointment of their chief executive.