Higher unemployment to impact real estate sector recovery in 2021 – Real estate consultancy company

If the current unemployment rates continue throughout 2021, the local real estate market recovery could be impacted, especially the leasing market, JLL Macau representatives said in the real estate consultancy company year-end property review.

“Impacted by the Covid-19 pandemic, all property sectors experienced an adjustment in their price levels. If the pandemic can be under control globally in 2021 and the low-interest-rate environment persists, Macau’s property market will see a recovery in the second half of the year,” the Director of Valuation Advisory Services at JLL Macau, Mark Wong, stated during the presentation.

“However, the unemployment rate and underemployment rate will continue to cast a shadow on the outlook of the city in the short term as a number of livelihood issues may occur when the government’s anti-pandemic measures and subsidies are no longer available”

As of November, 2020 local general unemployment rate is at 2.9 per cent, having been as low as 1.7 per cent in 2019, prior to the pandemic, with the unemployment rate for local residents at 4 per cent and the underemployment rate at 5.4 per cent.

“The employment rate is another area were compared to other cities it is not very high but in terms of Macau, it is already very high. Underemployment is also very high, over 5 per cent already. This will definitely influence the real state market if this continues in 2021 […] rental might also be impacted if these elementary factors continue,” Oliver Tong, JLL’s Head of Leasing stated.

The number of imported labour in the city has also dropped by 8 per cent from the end of 2019 to some 180,962 by the end of 2020, with the real estate consultancy noting that this contributed to the slow down of the residential leasing market, as residential demand near casinos was reduced.

The rental values of high-end residential properties and mass-to-medium residential properties were said to have decreased by 4 and 4.5 per cent year-on-year, respectively, in 2020.

The Managing Director at JLL Macau, Gregory Ku, noted that as expats left Macau, landlords started to slightly lower their rents.

“We didn’t see a huge discount yet. maybe for some very large units for which it is harder to find tenants they reduce rents by maybe 10 per cent, but for those smaller leasing units the rents are still strong,” Ku noted

Total residential transaction volume also contracted significantly in 2020, with some 6,185 residential sales reported in early December of last year, a 18 per cent year-on-year fall.

“In view of the Covid-19 pandemic, developers delayed the launch of their new projects. Homebuyers switched to the secondary market due to the lack of primary options. Major residential developments with good locations were recorded with more transactions, though their unit prices are not much lower than that of our primary projects,” Ku added.

Still, the current economic climate allowed for better deals in purchasing residential units, thanks to better mortgage deals, tax rebates and with developers offering incentive packages and price discounts.

According to Ku, two-bedroom units in 20 to 30-year old buildings were “highly sought after” as young first-time buyers were eligible to apply for mortgage lending up to 80 per cent to buy a residential unit with not more than MOP8 million (US$1 million).

When questioned if the current economic and employment climate could lead to more defaults in mortgage payments, the JLL Macau Managing Director, considered that regardless of the situation, local residents savings remained strong.

In November 2020, new approvals of residential mortgage loans increased by 6.7 per cent month-to-month to MOP2.92 billion, with the delinquency ratio at 0.26 per cent.

“I have not heard to hear any people in the banking industry [talking about defaults]. People worry but they still have cash in their pocket,” Ku noted.