Baby steps

The worst might be over for the residential property market but the recovery is set to be slow, with only significant improvement next year in the post-pandemic era, experts predict.

– Average home price in 1Q21

Though Macau’s gross domestic product (GDP) is tipped to start mounting a comeback in 2021 after a drastic decline in the previous year amid the unprecedented public health crisis, the stagnation in the residential property market — in terms of both prices and transaction volume — is expected to continue before any significant resumption of local economic activities like tourism and gaming.

Latest data from the Financial Services Bureau (DSF) show the territory recorded 1,365 home transactions in the first quarter of 2021, surging 34.4 percent year-on-year from 1,016 deals in the same period a year earlier when the COVID-19 outbreak affected the city the most. But the volume in the first three months tumbled 14.1 percent from the previous quarter and 22.7 percent from the third quarter of 2020.

Home prices also slipped 8.6 percent quarter-to-quarter to MOP97,493 (US$12,186.6) a square metre in the January-March period this year, which represented only a 0.6-percent growth from the same period a year earlier, the DSF data said.

“The results so far this year have matched our expectation, remaining lacklustre like last year, as the local economy has not shown any significant signs of recovery yet,” says Jane Liu Zee Kat, managing director of Ricacorp (Macau) Properties Ltd. “There has recently been a rebound in the number of visitors to the city, which, however, is still meager.”

The Macao Government Tourism Office has recently highlighted that visitor arrivals in the territory maintained “a steady upward trend” with the daily tally hitting 34,252 on 16 April, the highest figure since the onset of the pandemic last year, because “the pandemic situation remains stable in [Mainland China] and Macau.” While the daily visitation volume has resumed a daily average of over 27,400 travellers in recent weeks, it only translates to about 25 percent of the pre-pandemic level, which was over 107,960 visitors a day in 2019.

“There is still a housing demand in the market but potential buyers have just been way more conservative in the past year given the pandemic-induced economic turmoil,” says Ms. Liu. “I have a client who has spent almost a year and viewed over 80 flats across the city before sealing the deal recently.”

“There is still a housing demand in the market but potential buyers have just been way more conservative in the past year given the pandemic-induced economic turmoil,” says Jane Liu of Ricacorp Macau.

More incentives

With the insipid performance of the market and the lack of land supply for new private housing projects in the past decade and more, there has not been a launch in sales of any new large-scale residential complexes in recent months. Nonetheless, local developers continue to put forward various incentives to entice potential homebuyers for the remaining first-hand stock of their existing projects in light of the current climate.

Developer Shun Tak Holdings Ltd offered buyers a discount of 10 percent for three-bedroom and four-bedroom flats in its Nova Grand project — the high-end residential development of 1,775 flats in the downtown of Taipa — in April, in addition to other privileges, including a discount of up to 17 percent for buyers holding two or more flats and a discount of 10 percent for first-time buyers. Market sources say over 50 flats in Nova Grand have been sold in the latest sales campaign initiated by Shun Tak.

Another major local developer, Trust Construction and Investment Co Ltd, has also offered a number of incentives, including a longer settlement period of up to five years, for the first-hand sales of units in numerous luxurious projects under its belt, including Trust Legend in Areia Preta and Millennium Court in the district of Horta e Costa. Although uncertainties still cloud the local economy it has been on an upswing and the local property market in 2021 could fair better than the previous year, the developer remarks, adding that the current incentives for its projects will be valid at least until the end of May. 

“…we believe the low-interest rate environment will continue until at least the first half of next year [2022],” says Felix Chan, deputy CEO of ICBC Macau.

Low interest rate

Some lenders, like Industrial and Commercial Bank of China (Macau) Ltd (ICBC Macau), have also rolled out more mortgage products with a preferential interest rate, such as a longer repayment period, to meet the housing demand of residents in recent times. “We had some mortgage products with a preferential interest rate last year given the low interest rate environment… which were popular in the market,” said Felix Chan Kam Lun, deputy chief executive officer of ICBC Macau, in late March. 

“We think there are still conditions for us to roll out more [mortgage] products to support the home purchase demand of residents,” the executive said. “While the volume of home transactions declined last year over the pandemic, there was less room for an adjustment in home prices owing to the housing needs of residents.” 

Due to the ample liquidity in the local banking system and the indirect peg of the local currency — pataca — with the United States dollar via the Hong Kong dollar, the interest rate in the city has remained at a low level in recent years. “We’ve noticed there has been a hike in the long-term US bond rate in recent weeks while the short-term bond rate has been little changed… so we believe the low-interest rate environment will continue until at least the first half of next year [2022],” Mr. Chan reasoned.

“The recovery of the home market this year is expected to be slow given the current economic fundamentals, and I only expect a substantial improvement next year,” Chong Siu Kin, president of the Real Estate Association of Macau, remarks.

Large flats

Roy Ho Siu Hang, senior director of property agency Centaline Macau and Hengqin, believes the housing market will regain an upside momentum in the remainder of the year because of the low interest rate and the resumption of economic activities amid the Covid-19 vaccine programme worldwide. Expecting the number of home transactions could rebound at least 20 percent in 2021, he notes, “The recovery in the transactions of large flats will be particularly more conspicuous.”

“The transaction volume for large flats have taken a beating in the past few years over the government policies, accompanied with an adjustment in the price level,” he continues. “Going forward, it is expected that more buyers will be interested in these units, thus driving up the volume.”

Currently, the mortgage loan ratios for flats worth more than MOP8 million each range between 30 percent and 50 percent, while the rates for flats worth MOP8 million or below vary between 40 percent and 90 percent. 

The latest figures from the Statistics and Census Service show that the average price for flats smaller than 50 square metres each actually went up 12 percent year-on-year to MOP122,630 a square metre in the fourth quarter of last year amid the pandemic, while the average prices for flats between 50 square metres and 149.9 square metres each also recorded hikes between 1.1 percent and 10.9 percent over the same time period. The average price for flats equaling to 150 square metres or more, however, declined by 5.7 percent year-on-year to MOP111,941 a square metre in the October-December period of 2020.

Low confidence

The imbalance between the supply and demand and the low interest rate are among some major factors that have supported the city’s home prices in the past year, despite a significant drop in the transaction volume during the Covid-19 pandemic, says Chong Siu Kin, president of the Real Estate Association of Macau. “Local residents still have a lot of purchasing power [for flats] but they just lack willingness at the moment, waiting for the substantial recovery in the economy,” he says. 

A recent regular survey by the Macau University of Science and Technology (MUST) shows that the confidence level of residents in home purchase has been dismal. The Consumer Confidence Index compiled by the Institute for Sustainable Development at MUST said that the confidence level for home purchase was 69.94 in the first quarter of 2021, plunging 17.9 percent quarter-to-quarter. The index ranges from 0 to 200, where 0 means ‘absolutely no confidence’, 100 means ‘normal’, and 200 represents ‘confidence’. The gloomy sentiment for housing ownership and the overall local economy in the January-March period was due to the complexities of the recovery in the global economy and the pandemic situation worldwide, MUST explained in a statement. 

Slow ride

As more people around the world are given Covid-19 vaccines, economic activities are expected to gradually resume normal operation with the lifting of travel restrictions and other anti-epidemic measures. “The recovery of the home market this year is expected to be slow given the current economic fundamentals, and I only expect a substantial improvement next year,” Mr. Chong adds. 

The Centre for Macau Studies and Department of Economic at the University of Macau have lately forecasted the city’s GDP would rebound between 21.4 percent and 33.5 percent this year, after shrinking 56.3 percent in 2020, depending on the volume of visitor arrivals. Due to the lack of a clear process of vaccination and the uncertainty regarding the speed of the Macau government’s relaxation of travel restrictions, the research team at the university added: ‘Although there will be a recovery in 2021, the projected GDP does not yet reach the level of 2019, and the income of many residents has fallen.’

Ms. Liu of Ricacorp also foresees a slow ride. “Should the overall macroeconomic prospect and the pandemic situation across the globe continue to improve, there could be an upward momentum in the market starting from the second half of this year,” she reasons. “If not, we then have to wait and see.”