It is destined for failure, even before implementation.
The property measures introduced by the government in February, as many critics predicted, have failed to curtail the gathering momentum of home prices. Although the so-called ‘spicy’ measures have turned into sweeteners for the market, the public keeps calling for more government intervention as home prices are set to pull even further away from the affordability of many residents.
According to calculations based upon data from the Financial Services Bureau, the average home price here stood at MOP113,855.5 (US$14,231.9) per square metre in the first half of this year, up 15.1 per cent from MOP98,932.7 a year earlier. The number of home sales totalled 6,790 units in the January-June period of 2018, also up 16 per cent from the previous year.
Another official gauge, the residential property price index, hit 265 points in the March-May period, a record high since the index was introduced in 2017. The index also rose 5.2 per cent from the December-February period, prior to the new property curbs being introduced.
Legislator Antonio Ng Kuok Cheong laments as “ineffective” the February curbs; namely, imposing a new stamp duty of 5 per cent upon buyers acquiring a second residential unit and 10 per cent upon those buying a third or more properties.
“While the nearby Hong Kong Government prepares to roll out a vacancy tax on new flats, the Macau Government seems to have nothing in the pipeline following the failed intervention [in February],” the legislator slammed.
In late June, the nearby SAR unveiled a plan to impose a vacancy tax on property developers for all newly completed flats unsold or not rented for six months in a year, with the tax translating to about 5 per cent of the value of each unit. The tax seeks to discourage developers from hoarding unsold flats whilst easing the supply shortage in the Hong Kong market.
Mr. Ng thinks the government should follow suit in proposing a vacancy tax for developers to stabilise the supply of newly completed homes. This would also keep stabilise home prices as it would be more difficult for developers to sell new flats in tiers, raising prices in later sales, he added.
It is not an uncommon practice for developers in Hong Kong and Macau to launch the sale or presale of a new project with a limited number of available units, resulting in the perception that the flats are in great demand and allowing developers to ask for higher prices for subsequent sales.
Official data show the average transaction price of some newly completed projects or the presale of unfinished projects here were more expensive in the second quarter than in the first quarter. Flats in La Marina – a high-end development of over 2,700 units in the Areia Preta district – fetched on average MOP158,708 per square metre in the second quarter, rising 8 per cent from the first quarter.
Average home price in 1H
Another new high-end project in Taipa – Nova Grand – recorded an average transaction price of MOP162,690 per square metre in the April-June period, increasing by 5.2 per cent from the previous period. The average home price as a whole in the city declined 4.3 per cent from the first quarter to MOP111,079 in the second quarter.
Nestor Ng, president of real estate agency Anzac Group Co. Ltd., acknowledges some developers here launch new home sales in several phases. “But I don’t think they have any intention of hoarding the flats – they simply want to test market reception and formulate the relevant marketing strategies accordingly,” he noted.
The property agent understands the public demand for a vacancy tax to curtail home prices but thinks the impact would be limited as there are “not many” newly completed flats remaining vacant here compared to Hong Kong.
“While the nearby Hong Kong Government has prepared to roll out a vacancy tax on new flats, the Macau Government seems to have nothing in the pipeline following the failed intervention [in February],” says legislator Ng Kuok Cheong
“The reason for the continuous rising home prices in Macau is due to the lack of supply,” he argues. “The government should look for a means to enhance the housing supply to resolve the imbalance between supply and demand to stabilise the housing market.”
Following strong growth in the first half of this year, property agencies predict that the property market could maintain its upward momentum for the remainder of the year.
Centaline (Macau) Property Agency Ltd. said in its 2018 interim review that it expects home prices to rise 15 per cent this year. Macro economic factors like the trade war between China and the United States will have minimal impact upon the local housing market, which is driven by the lack of supply, the robust local economy and the imminent opening of the Hong Kong-Zhuhai-Macau Bridge, the agency said. Latest government data show the city’s economy expanded 9.2 per cent in the first quarter of this year, on the heels of a 9.1 per cent increase for the whole of 2017.
Macao’s ranking in Global Real Estate Transparency Index
Real estate consultancy agency Jones Lang LaSalle (Macau) Ltd. is less bullish but remains optimistic, predicting a 10 per cent hike for home prices by year-end. Global economic fluctuations and rising interest rates will slightly slow the rise of home prices in the second half of this year, the agency explained in its 2018 interim market review.
In the wake of six rate hikes in the U.S. since December 2015 commercial banks in Macau and Hong Kong have so far kept their rates unchanged despite the city’s indirect currency peg to the greenback via the Hong Kong dollar due to ample liquidity. But it is widely expected that lenders in Macau will finally raise the rate this year.
JLL Macau also claims that the local home market has become ‘healthier’ as transactions are currently driven by end-users, following the latest government intervention. On the day that the new stamp duty for buyers owning more than one property was rolled out in February, the Macau Government unveiled new mortgage loan ratios for first-time resident buyers aged 21 to 44 years old in a bid to help the young buy their own homes. The latest government data show local first-time buyers accounted for 81.5 per cent – or 2,931 units – of total home sales in the March-June period compared with only 43.7 per cent last year.
“It is the first time the housing market has been dominated by first-time buyers and those who want to exchange their smaller flats for bigger ones,” Jeff Wong Chi Wai, head of residential at JLL Macau, remarked. “[The government measures] successfully dampened speculation in the market, as only about 4 per cent of home sales recorded in the first half of this year were investors owning two or more properties at the time of purchase.”
From his perspective, rising home prices are due to shortage of supply; for example, the number of marriage registrations averaged 3,946 annually here in the past five years, while the annual number of newly completed units averaged only 2,576 in the same period. Mr. Wong thinks it is important for the government to ponder enhancing the supply of second-hand homes, as “it will take at least seven to 10 years to build new homes through land development”.
There have been discussions earlier this year about a vacancy tax on second-hand properties in a bid to boost the number of available units for sale and rent but the government has so far been hesitant to do so, given the technical difficulties such as how to define a vacant home. Official data shows that the number of vacant units totalled 15,252 units as at the end of last year, accounting for 6.82 per cent of total residential units, up from 5.7 per cent in 2016.
Legislator Ho Ion Sang stressed that the government has to look at the problem, regardless of the challenges. “It should not simply ignore this issue due to technical problems or divided opinions,” he noted. “It should quickly start studying how vacancy tax could be implemented here, looking into the examples of regions and countries that have similar taxes in how to define vacant units.”
Like others, he believes the market will remain red hot unless problems on the supply side have been addressed. “The housing problems of residents can only be eased . . . through both property curbs and the increase in housing supply,” he concluded. “The government should be committed to resolving the problem despite the hardship.”
Macau property market now ‘semi-transparent’
The Macau property market has for the first time been deemed ‘semi-transparent’ by global property consulting agency Jones Lang LaSalle in its Global Real Estate Transparency Index 2018.
Of 158 countries and regions, the city was ranked 60th in the latest edition, moving up 10 places from 2016, according to the report. Macau was among the top 10 movers in the 2018 edition alongside Myanmar, Thailand, India and South Korea.
“It is the first time that the home market has been dominated by first-time buyers and those who want to exchange their smaller flats for bigger ones,” says Jeff Wong Chi Wai, head of residential at JLL Macau
The rise of the city in the rankings was due to the strengthening efforts by the government in clamping down on money laundering and releasing detailed residential sales figures every month, said the report.
Regarding other economies in the Greater China region, Hong Kong and Taiwan are regarded as ‘transparent’ property markets in 13th and 26th place, respectively, while Mainland China, deemed ‘semi-transparent’, is in 33rd place. The Anglophile economies – the United Kingdom, Australia and the United States – are the top three most transparent markets in 2018.
The index, which is published every two years, measures the transparency of global property markets in terms of various issues from investment performance measurement to regulatory and legal systems. The countries and regions are graded in five tiers: highly transparent, transparent, semi-transparent, low transparency, and opaque.
Praia Park best seller in 1H
The luxury residential project next to the public housing complex in Seac Pai Van was the best selling new project in the first half of this year, government figures show.
According to calculations based upon data from the Financial Services Bureau, the project developed by New Hong Yee Investment Company Ltd. – in which Executive Council member Liu Chak Wan holds a 5 per cent stake – moved 732 units in the January-June period at an average MOP139,359.2 (US$17,419.9) per square metre. Pre-sales in the first half of this year represented 39.5 per cent of the total of some 1,850 units in Praia Park.
La Marina, a high-end development comprising more than 2,700 flats in the Areia Preta district, was the second bestseller, with 459 homes sold in the first half fetching an average MOP153,180 per square metre. The project – developed by Polytex Corporation Ltd. – saw 392 units transacted last year, when the developer rushed to complete works prior to the deadline of the land concession in July of last year.
Grand Oasis – part of the 4,000-plus luxury flats in Cotai developed by Empresa de Fomento Industrial e Comercial Concórdia, SA alongside One Oasis and Sky Oasis – also moved 431 flats in the first six months at an average MOP141,071.4 per square metre.
Despite a smaller transaction volume, The Carat, developed by state-owned China Overseas Land and Investment Ltd., was the new project here with the highest priced transactions on average in the January-June period. The project, comprising over 410 high-end homes in NAPE, recorded 95 transactions at an average MOP171,645.5 per square metre in the first half.
High-end project Paramount in the district of Horta e Costa, comprising about 100 homes, trailed behind at an average MOP165,126.8 per square metre for 30 transactions in the first six months.
Another new project, Waterfront Duet, comprising some 1,000 homes near the Macau Yacht Club in Fai Chi Kei, recorded 334 transactions in the January-June period at an average MOP115,742 per square metre. Nova Grand – a high-end residential development of 1,775 flats to be completed by the end of this year by Hong Kong-listed conglomerate Shun Tak Holdings Ltd. – moved 250 units at an average MOP158,891.8 per square metre.