Developer Telok Real Estates Partners subscribes to the mantra that in every crisis there’s an opportunity. With the Macau economy suffering a recession due to the gaming revenue crisis, house prices are dropping as a consequence. Companies like Telok are queuing to buy cheaper to profit in the future. For the company, urban renewal is the way to go here. “It was too expensive to buy anything in the past two years,” Philip Pang, a partner at Telok Pang told the South China Morning Post (SCMP), adding that property here was overpriced, even with record economic growth. But, with the real estate market suffering a correction, opportunities have arisen: “With a good entry point, we can achieve a better investment return,” he said. Pang noted that Telok is hoping Macau prices return to a realistic level. Since 2012, when the company became a developer after being a real estate investment fund, Telok has invested less than half (HK$430 million) of its total investment fund of HK$1 billion. Telok’s partner noted that the decision to invest in urban renewal projects in Macau was due to the limited land supplies in the city: “Unlike Hong Kong, there is no land sale in Macau and the only alternative is to acquire land through private negotiation”. Mr. Pang believes it’s a good bet as Telok is willing not only to increase the investment return but also solve lots of problems stemming from ageing properties here, despite time consuming renewal works. “According to our study, there are 55,400 units in more than 3,000 residential blocks built before 1990. These buildings are mostly seven storeys high with one unit occupying one floor without a lift. Every building will have an average of 10 to 20 units”, he told SCMP. Speculators With speculators leaving Macau as the real estate market slows, Telok thinks it’s time to invest, especially now that the competition is less. “We found Macau has greater potential for small players like us. Most big developers prefer pouring money into Mainland China instead of focusing on Macau. It means less competition for us in land replenishment.” Regarding Macau, Philip Pang says that the current high prices of property are still not as bad for the population as in Hong Kong. “The upswing in home prices is making it increasingly difficult for young people to buy their first home in Macau and Hong Kong. But youngsters in Macau appear to have less difficulty than those in Hong Kong. People working in Macau will enjoy a faster pace in salary growth at a time when home prices are declining.” He says that average annual wage growth in Macau was 15.8 per cent in the last four years, while home prices had decreased 12 per cent from the peak in the second quarter of last year, “with some new projects falling as much as 30 per cent”. He believes that property in most demand in the coming months will be flats in the HK$3-4 million range. “For a couple who work in the casinos and earn a monthly income of HK$40,000, they can afford to buy flats worth HK$3 million to HK$4 million each by seeking a mortgage loan of 70 per cent of the flat value. With a HK$1 million initial down payment, the couple will need one-third of their salary or HK$12,000 for monthly mortgage instalments.”
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