In the space of a year Macau’s property market has gone from boom to not quite bust but certainly deflated.
The start of the year saw thriving transaction rates, but under the influence of the global financial meltdown, the second quarter has been considerably cooler.
In addition, with the government putting the brakes on the gaming industry and the mainland’s limitation of visitor visas to once every three months, the complexion of the property market has taken a turn for the worse.
Data from the Statistics and Census Service (DSEC) shows that property transaction volumes in the first half year decreased by 30 percent compared to the same period last year.
These market fluctuations are nothing new to Lao Ngai Leong, the standing vice chairman of the Macau General Association of Real Estate and chairman of the Chong Sai Enterprise Group Ltd.
He says the real estate market is “entering a period of adjustment”.
Speaking to Macau Business, Lao said the stable and healthy development of Macau’s property market was crucial to a city with a seriously short supply of land.
As a free-trade port, Macau’s real estate industry acts as a bell weather for the rest of the economy and how it reacts to the machinations of the mainland and overseas economies.
Every few years an obstacle appears and there is a re-arrangement – usually a painful one – across industries.
Over the past 20 years, Lao Ngai Leong has worked to steer his enterprises, primarily dependent on the real estate industry, through this environment.
In that period, he has launched nearly 20 property developments, including Hang Kei Garden, Jade Garden, Chong Keng Toi, Sunny View Garden, Dynasty Garden, and Caesar Fortune.
And as Chong Sai Group and Chong Sai Real Estates’ portfolios have grown, so has the profile of the company.

Secrets of success

Lao Ngai Leong is well known for his quick wit and canny style among the denzens of Macau’s real estate industry. The ups and downs in the industry have not fazed him but fostered the growth of his enterprises.
So what are the secrets of his business success?
Following China’s reform and opening-up in the early 1980s, Macau sustained continuous economic growth. Europe and America offered quota and tariff preferences to products made in the city and many Hong Kong merchants invested in the export and processing industries.
In addition, overseas and mainland residents moved to settle here, all of which contributed to a prosperous real estate industry.
Lao saw this as a turning point, decided to take advantage, and established the Chong Sai Real Estate Company jointly with an associate from Hong Kong, gaining himself a precious foothold in the market.
After the uncertainty in the run-up to Hong Kong’s return to China in 1997, Lao’s partner from across the water decided to withdraw his investment. But Lao remained confident.
“The key is to take the pulse of the market,’’ he says: “Once the hardship of recent times is driven off, I will gain a another foothold in Macau’s real estate industry.’’
Lao took control of Chong Sai by himself and made the bold move to absorb real estate in a time of recession, building a reputation among his peers along the way.
In the late 1980s and early 90s, China and Portugal successfully resolved the issue of Macau through negotiation, and overall prospects brightened.
A number of large-scale construction projects got the green light and the sector was bouyed with sufficient capital. Mortgage loans also became more easily available, taking the construction and real estate industries to another peak.
Chong Sai Real Estate knew it was time for rapid expansion and launched a series of property developments one after the other.
Utilising the lessons learned during the hard times, the company managed to develop into a large-sized real estate enterprise.
Meanwhile, the market in Macau experienced trials and hardships, however, with Lao’s steady hand on the tiller and some cunning investment strategies, the company was able to rise above the risks and grow.

The umbrella incident

In 1998, prior to Macau’s return to China, public security was at a all time low and gangland violence gripped a city nervous about what the future held.
There was negative economic growth and the property market plummeted four years in a row. In what some saw as a surprise move, Lao put units in Sunny View Garden in Avenida do Coronel Mesquita up for sale.
Against the odds, it attracted a large group of buyers, who queued up for a slice of the action despite the glum economic conditions and the scorching sun.
Lao came to the rescue, however, handing each and every one of the prospective buyers a brightly coloured umbrella to keep the sun off their heads.
A smart move. Soon two streets worth of queing clients lit up with a vivid splash of colour, attracting the attention of the media.
Amazingly enough, at that time property prices were not low . Lao says this illustrates the great importance of positioning and planning when it comes to property investments.
First of all he says, one needs to be certain of the environment and the market situation. Second, the costs need to be worked out, but third and most important, is the design of the property and making sure the materials used meet both the residents’ demands and fit in with the budget for construction. Not forgetting the sales network, which is vital.

Theory and practice

Innovation is also a key factor. For instance, Lao’s Caesar Fortune development in Taipa was merely three incomplete blocks when it started out.
When it was taken over by Chong Sai, they re-invested, re-packaged and then re-introduced it to the market, transforming it into a hot property which commanded a good price and top sales.
The secret lay in the packaging. Balconies were turned into gardens and leisure venues and fine and reasonable materials were used to create a European style.
After the classy upgrade plus an improvement to its exterior image, the property offered residents a place to really feel at home.
Such style was comparatively rare at that time. And perhaps more crucially the development tapped into the future potential of Taipa – look at it today.
In addition, the branding effect of the enterprise also helped to promote the sales of the property.
Endowed with trademark Chiu Chow business nous Lao began to explore the changing the structure of his business despite the fact that things were running smoothly at the time. His view was “Don’t put all your eggs in one basket.
In terms of the real estate industry, Chong Sai’s infrastructure and property management business were also doing very well.
At present, Chong Sai’s real estate sales and property management after sales service are carried out jointly.
This has not only boosted the image of Chong Sai Real Estate, but also enabled its property management business to extend into real estate projects belonging to other brands.

Christmas bonus

In 1989, significant numbers of Taiwanese invested in Macau and Zhuhai, renting factory buildings and later a joint venture was set up to run a factory making Christmas lights.
This was the first time Lao had diversified away from real estate.
Since then, his investment areas have gradually expanded, covering projects such as the import and export trade, forestry, hotel and travel, information technology, mineral resources development, finance, fuel and more.
This forms a business empire which stretches from Macau to Hong Kong, Taiwan, Guangdong, Hubei, Qinghai, Europe and the United States. Chong Sai Group now has more than 20 subsidiary companies and joint venture companies.

City planning

Reviewing Macau’s economic development in recent years, Lao says the real estate market is inextricably linked to the overall economic environment.
The expansion of the wider economy brought by the opening up of the gaming industry, along with a continuous increase in the city’s international reputation, has attracted foreign investors.
As Macau’s property prices are lower than those in Hong Kong and, comparatively, have more room for appreciation, buyers from Hong Kong and the mainland are also attracted to invest here. Such demand has boosted the property market.
In general, the structure of the capital source that supports the whole property market is fundamentally different from that which funded rapid expansion in the early 1990’s.
The main source of funding was from state-owned enterprises, financial and rural enterprises in the mainland. Once macro-economic control was carried out in the mainland, the fragile fund chain will immediately broke down and resulted in a rapid fall in the city’s property market.
“The boom in recent years has been mainly driven by capital from international investors, urban enterprises in the mainland, Hong Kong, Taiwan and Macau. Such a diverse and steady capital flow will not easily break off and run out of track,” said Lao.
“However, risks still exist. When the market develops too fast and flourishes too rapidly, it will easily lead to liquidity problems. Therefore, following the adjusted pace of the overall economy, the property market will also undergo a corresponding adjustment period,” he adds.
Lao believes this adjustment will continue until the end of the year and he points out that following an increase of external investors, Macau’s real estate market faces more opportunities as well as challenges.
Opportunity attracts capital and hot money and contributes to an expansion of the whole economy. The situation is very different from the “closed-market” of the past, where the real estate market rarely had such large-scale investments.
At the same time, this expansion has led to land shortages and a rise in construction costs. It also creates labour shortages and puts pressure on small to medium sized enterprises.
Also, overseas real estate developers and agencies enter Macau with their new business philosophies and strategies, which conflict with local enterprises.
The shortage of land has been a problem for years in Macau and Lao is very concerned about the progress of the government’s city planning work, including old-district re-development and land reclamation.
He believes it is imperative to complete scientifically reasonable city planning as soon as possible to offer guidance to the real estate sector.
Lao said clear and definite city planning also serves as a prerequisite for investors to make decisions.
In view of the adversity facing small and medium sized real estate enterprises, Lao believes that in an opened-up market, the best is to react positively.
They should take up more training provided by the government or guilds to gain self improvements and constantly strengthen their competitiveness.
Cooperation with advanced overseas enterprises should also be stepped up to learn new business philosophies both in the boardroom and on the shop floor.
The government should also strengthen its assistance such as offering tax breaks, simplifying and unifying administrative procedures to create a favorable environment for investments.

Social responsibility

Lao is engaged in a number of social affairs and believes that an entrepreneur has responsibilities towards society.
As a deputy of the National People’s Congress for three consecutive years, he has always cared for peoples’ livelihoods in different regions and participated in the social and political life of the country.
He has repeatedly provided suggestions on issues such as the development of China’s Western Region, the “Three Problems on Agriculture”, food safety, state-enterprise reform, social security, regional economy, port construction, allocation of educational resources, and coordination between Macau and its neighbourhood.
It was the efforts of Lao and other representatives that saw the practice of opening the Macau and Zhuhai border crossings simultaneously.
As chairman of the Macau Chiu Chow Cultural Association, he gave full support to the winning bid to host the 13th International Chiu Chow Community Organisation.
He is very active in promoting links between his home province and Macau.
In 2006, as the Chairman of Macao Region China Council for the Promotion of Peaceful National Reunification, he also promoted links across the Taiwan straits.
He has also be at the forefront of fund raising for the victims of the Southeast Asian Tsunami and the devastating Sichuan earthquake.

by Yu Wen