Improved investment sentiment was found in the city's residential market following short-term uncertainty during the third quarter of last year when the Government bore mounting pressure arising from local residents regarding affordable housing, as well as the current real estate development approval process and land policy. Three months into 2008, a string of positive news has created a 'good atmosphere' in the residential market on the heels of progress in financing the Hong Kong-Zhuhai-Macau Bridge.
Moreover, the sale of two connected residential sites located in Fai Chi Kei attracted strong demand and aroused much attention recently. One reason: The land sale was only the Government's second land auction via public tender since the 1999 handover. Furthermore, the two land plots raised a total of MOP 1.4 billion (US$ 175 million) – about nine times more than the opening bid. The price achieved at auction demonstrates a continuingly strong market appetite for prime land sites.
Based on the accommodation value of over 3,000 patacas per square foot, the estimated selling price for the development two years later is likely to reach over 5,000 patacas per square foot – marking a record high price for the district where the average transaction price was previously capped at 2,000 patacas per square foot.

Ripple effects

Benefiting from such encouraging land sales, The Praia – located in proximity to the above two sites – is likely to rise by 20 percent in the near term. The Praia's average selling price was capped at 2,300 patacas per square foot when it was recently put on the market.
Reversing the softening demand of the third quarter of 2007, the number of residential units transacted was recorded at 4,830 units in the fourth quarter of last year, up 33.8 percent quarter-to-quarter but down 25 percent on a year-to-year basis according to official stamp duty records. Total transaction value reached 11.59 billion patacas during the fourth quarter of 2007 – an increase of 57.7 percent quarter-to-quarter or 12.1 percent year-on-year. Residential transactions for all of last year rose by 25.9 percent to 21,628 units, but more importantly, transaction value surged 120.3 percent year-on-year to 42.1 billion patacas; price growth has outstripped volume growth.
Average residential capital values in Macau were up 3.1 percent quarter-on-quarter or 28.9 percent year-on-year to 1,314 patacas per square foot during the fourth quarter of 2007. Macau's peninsula was priced at 1,220 patacas per square foot with an increase of 8.1 percent quarter-to-quarter or 36.4 percent year-on-year. Taipa appeared to be the most expensive residential area with average values up 7.5 percent quarter-to-quarter or 35.7 percent year-on-year to 1,834 patacas per square foot, followed by Coloane with average values reaching 1,595 patacas in the fourth quarter of last year.
Vigers Research predicts that average capital values of the following properties in the first quarter of this year will rise by 11.1 percent from the fourth quarter of 2007 to 2,663 patacas per square foot, once the final figures are in: Nova Taipa Gardens and Ocean Gardens will experience the most noticeable upward trend with 15.8 percent and 11.7 percent quarter to quarter growth to 2,450 patacas and 2,580 patacas per square foot, respectively. Supreme Flower Garden and La Baie Du Noble will also perform well with expected capital values reaching 2,820 patacas and 2,800 patacas per square foot respectively, in the first quarter of 2008.

Luxury residences

The city's luxury residential sector fared well despite global financial volatility. Speymill Macau Property Company, listed on the London Stock Exchange's Alternative Investment Market (AIM), sold 243 residential units accompanied with parking spaces, in three luxury waterfront residential towers at Rua Central da Areia Preta on the Macau Peninsula for 1.29 billion patacas – approximately 38 percent higher than the transaction price the company paid in December 2006. With the Government attempting to regulate the sizzling luxury residential sector, some projects saw delays or were put on hold for planning and construction permit purposes, leading to tighter supply.
Considering limited prime property supply, investors turned out to be more aggressive in snapping up luxury real estate. Macau Property Opportunity Fund Limited recently purchased 24 residential units from One Central Macau Residences following the company's previous acquisition of Tower 6 of One Central Macau Residences in November 2006. Vigers forecasted a total of 3,480 luxury residential units would come online in 2008. New developments including The Residencia and Nam Van Lake C5C6 on the peninsula, and Buckingham, Windsor Arch and the Avenida Wai Long project in Taipa are expected to be released within the first half of this year.

The commercial sector

The demand for local commercial space has not been as strong as previously, but things are changing: Macau's large gaming and tourism projects have attracted considerable foreign investment, created jobs and brought in expatriates.
The number of office units transacted in 2007 registered 1,109 units, up 8.2 percent when compared to the previous year. Office transaction value for all of last year reached 1.9 billion patacas – a 35.5 percent year-on-year increase. Average annual office capital values witnessed an increase of 14.1 percent from 2006 to 2,065 patacas per square foot this year. Office price growth will likely be sustained in 2008 with a predicted increase of 15 percent supported by the booming services sector and limited supply.
Casino development continued to be the main driver of the retail property market. The completion of Wynn Macau's expansion work has added an extra 20,000 square feet of retail space (encompassing 11 new boutiques) to the market. Increasing numbers of visitors who are willing to stay longer in Macau has generated more tourist spending in the SAR. Per-capita spending of visitors for the fourth quarter of last year rose by 8.2 percent from the previous quarter to 1,714 patacas. Against the background of a continuing tourist boom, Hong Kong-listed Emperor International Holdings recently spent 430 million patacas to acquire a three-storey commercial and residential block at the junction of Avenida do Infante D Henrique and Avenida da Praia Grande.

David Cheung
Executive Director of Vigers Appraisal and Consulting