Real estate agents are worried that subsidised flats hitting the market under the home ownership scheme will hurt the private market

The first units under Macau’s revamped home ownership scheme came onto the market this month at the Weng Neng housing complex.

It is a development watched with interest by developers, agents and agencies in the private sector. Insiders are most worried about the speed at which the remaining thousands of units currently under construction will be put up for grabs.

The government’s public housing policy includes social housing for rent, and economic housing for sale, at subsidised prices under the home ownership scheme. The waiting list for the latter includes more than 11,000 households.

Weng Neng’s apartments, at Bairro do Hipódromo on the peninsula, are the first home ownership scheme flats put up for sale in several years. They are part of the 19,000 public housing units the government has pledged to build from 2007 until the end of next year.

The prices at the complex range from MOP565,100 (US$70,638) to MOP863,300 for a T1 unit. A T4 unit’s price can vary from MOP1.11 million to MOP1.68 million.

Overall, the average price is around MOP1,256 per square foot.

After selling Weng Neng’s 880 units, the government will launch the pre-sale of some 2,703 other subsidised flats currently under construction in Taipa. There are at least some 800-plus in the works elsewhere in the territory.

Real estate professionals so far are playing defense. They mostly expect the impact of the home ownership scheme flats to be felt in the number of transactions and consequently in the liquidity of the private real estate market rather than in prices.

Ronald Cheung Yat Fai, chief executive officer of real estate agency Midland Realty (Macau) Ltd., says the announced 19,000 public housing units are enough to cover the needs of Macau for a decade. If they were to be handed out all in a year, private real estate market demand would suffer, he warns.

Price decline

Ricacorp executive director Jane Liu has similar concerns. She says Macau’s small population may not need such a huge quantity of public housing units over a short period of time.

Ms Liu notes the government also loosened the eligibility criteria for the home ownership scheme, meaning more people can now apply. As thousands of units are currently in the pipeline, this has affected investors’ willingness to enter the private market, she says.

Ricacorp’s executive director estimates the new public housing units will mostly impact the prices of second-hand property. She predicts a price decline of 10 to 15 percent, but only in older buildings.

Currently, the private property market is still recovering from the introduction of a new special stamp duty of up to 20 percent on transactions earlier this year. Home prices stayed almost put in September at MOP39,217, with a marginal drop month-on-month. That was still 11.7 percent higher than a year before, according to the Financial Services Bureau.

Meanwhile, the number of transactions has plunged by two digits since the stamp duty was enacted.

Legislator-cum-developer Ung Choi Kun believes the public housing policy will have little effect on the private property market. “From a macro perspective, only by solving the housing problem can people live and work, and eventually further pursue entering the private housing market,” says Mr Ung, who is the president of the Association of Property Agents and Realty Developers.

Warren Leung Cheuk Hang, director of Shun Tak Holdings’ property sales arm, is also not concerned by the impact of public housing. He told reporters last month that he still expects prices in the private real estate market to rise by 15 percent next year.

The government has stressed prices of the economic housing units at Weng Neng complex are not linked to the private market, but rather based on the purchasing power of the awaiting eligible families. The prices were calculated so that mortgage expenses would not represent more than around one third of a household’s income, the Housing Bureau told Macau Business.

Profiteering charge

Mr Ung admits the prices at Weng Neng are “not high” in comparison with the private real estate market. “But the fundamental role of public housing is to be a social welfare policy, solving the housing needs of low-income families. From this perspective, the pricing is high for lower to middle classes.”

He suggests future economic housing units be put up for sale at a fraction of the Weng Neng prices, even below constructions costs. Mr Ung suggests a reference price tag of around MOP300,000 per unit.

The Weng Neng complex was first announced in 2005. To allow for the construction of Windsor Arch, a luxury residential development in Taipa, the government requested the developer, among other things, to build the 880-unit public housing complex.

The government got 755 units for free, while the developer was authorised to sell the remaining 125 at government-set prices, as stipulated in the 2005 contract. This year, the administration decided to buy all the developer’s units, at the 2005 prices, adjusted for inflation. The twist is that the government is now selling them at triple or more, says outspoken legislator Au Kam San, accusing local authorities of using public housing to make a profit.

The secretary for transport and public works, Lau Si Io, has already dismissed such claims. He said any surplus made is to go to the public purse and thus serve the population.

Costly reclamation

The construction cost of the new reclaimed areas planned by the government will hit MOP7 billion (US$875 million). This only includes the land reclamation itself and may even rise further.

The 361.6-hectare reclamation project will be divided into five different areas, two located on the Macau Peninsula and three in Taipa. The reclamation should be completed by 2017.

The government has opened a new round of public consultation focusing on the development of the new urban areas. It runs until December 23.

Land premium increases

The government has a new formula for calculating land premiums, starting this month.

According to a press release from the Land, Public Works and Transportation Bureau, land concessions for the construction of high-rise buildings for residential purposes will see their land premium increase by 93 percent. For other purposes, land premiums will increase by up to 53 percent according to the new calculation formula.

The new formula will only be used for new projects. The last land premium update took place in 2007.

By Cris Jiang