Macau Government Reviews Mortgage Rules to Facilitate Home Upgrades
According to global property consultant JLL's recently released Macau Year-end Property Review 2018, shadowed by the various regulatory measures on the property market and the external economic uncertainty, Macau's property market softened and saw a slowdown in investment sentiment.
According to the DICJ statistics, Macau's gaming revenue continued to grow following the uptrend in 2017 and recorded at MOP 302.85 billion in 2018, up 14% y-o-y. In fact, the city's gaming revenue has seen monthly y-o-y growth for 29 consecutive months since August 2016, and been back to the over MOP 300 billion level for the first time since 2014. The VIP and mass markets saw y-o-y growth of 12.8% and 20.0% respectively in their revenues in the first three quarters of 2018, with VIP market accounting for 55.4% of the total gaming revenue, down 1.5% y-o-y.
Macau's GDP totaled MOP 306.08 billion in the first three quarters of 2018, up 5.6% y-o-y. The expenditure-based GDP showed that the growth was mainly driven by the gaming-related export of services that grew by 11.0% y-o-y and made up 85.3% of Macau's total GDP. During the first three quarters, private consumption expenditure and government consumption expenditure rose by 5.1% and 4.0% y-o-y respectively, while fixed capital formation fell by 11.2% y-o-y due to the reduced number of construction projects.
Macau's total visitor arrivals recorded at 32,233,000 in the first 11 months of 2018, up 9.1% y-o-y. Visitors from Mainland China were still the dominant, accounting for 70.8% of the total, while 48.7% out of which visiting Macau under the Individual Traveller Scheme (ITS). Remained the key growth driver for Macau's visitor arrivals, Mainland visitors increased by 13.3% y-o-y. As of November 2018, the total supply of hotel rooms in Macau recorded at 38,100, out of which 24,500 were five-star hotel rooms. The cumulative occupancy rate of hotel rooms in Macau increased to 91.3%, while the average length of stay of guests maintained at 1.5 nights.
The labor market in Macau remained broadly stable in 2018. According to the DSEC statistics, the unemployment rate fell a bit to 1.7% while the overall median monthly income stayed at MOP 16,000 as of the end of the third quarter. The number of imported labor in Macau reached a record high of 188,854 as of end November, up 5.2% from end 2017. The total resident deposit in Macau increased to MOP 608.10 billion as of end October 2018, up 5.5% from end 2017.
"Driven by the completion of major gaming facilities during the year, Macau's economic indicators in general saw a healthy growth in 2018. The property market was relatively active in 1H18. However, investment sentiment became cautious in 2H18 due to the economic uncertainty caused by the intensifying trade war between China and the US, Brexit dilemma and potential interest rate hikes. In view of the slowing economy in China, a few analytic institutions have forecast that Macau's gaming revenue would see a slower growth. We expect Macau's property to face pressure in 2019," says Mark Wong, Senior Manager, Valuation Advisory Services at JLL Macau.
Macau Residential Market Highlights
The total residential sales transaction volume in Macau continued to grow in 2018. According to the DSEC statistics, a total of 10,405 residential sales transactions were registered in the first 11 months of 2018, up 6.3% y-o-y. The growth was mainly driven by the number of transactions in 1H18. In 2H18, the number of transactions reduced due to the external economic uncertainty.
On the supply side, 28 projects were issued with pre-sale consents in 2018, involving a total of 2,747 residential units or approx. 322,055 sqm gross floor area. During the year, several presale or completed projects were launched for sale. According to the DSF information, a total of approx. 2,956 presale transactions were recorded as of early December 2018, accounting for about 28.5% of the total number of residential transactions. It increased significantly in terms of both the number and ratio comparing with the same period in 2017.
The capital values of high-end and mass-to-medium residential properties rose by 3.5% and 7.8% y-o-y respectively in 2018, while yields recorded at 1.6% and 1.7% respectively. Growth was mainly seen in 1H18; 2H18 was relatively stable.
In the leasing market, residential rentals went up with the strong demand; the number of imported labor reached a record high in 2018. The rental values for high-end and mass-to-medium residential properties grew by 17.2% and 12.2% y-o-y respectively.
"The government launched a series of corrective measures in 2018 including the imposition of a new stamp duty on buyers acquiring more than one residential property, leading to a significant decrease in speculative activities in the residential market due to the increased investment costs. Moreover, the number of residential transactions worth not more than MOP 8 million saw an increase as the government loosened the mortgage lending ratios for the young, first-time homebuyers. However, the potential demand from this group of first-time homebuyers had been absorbed by the market by end 2018. With the current volatility in the external economic environment, end-users and investors have generally adopted a wait-and-see attitude. Coupled with the government's announcement that 4,000 public housing units will be made available in 2019, residential transaction volume may stay at the low level in the near term while transaction value may fall a bit. Nevertheless, with the healthy economic fundamentals and the over MOP 600 billion resident deposit, a substantial price correction is unlikely to be seen in the residential market", comments Jeff Wong, Senior Director of Capital Markets at JLL Macau.