International economy uncertainty and lack of favourable policies to continue pressuring luxury property market – MPO

Macau Property Opportunities Fund (MPO), a closed-end property investment fund managed by Sniper Capital, indicated in a recent update to investors that international economic uncertainty and continuing local high-end real estate restrictive policies would continue to impact the Macau luxury property market this year.

According to MPO, after a poor first six months in 2019, with the number of property transactions in the city falling 42 per cent year-on-year, the residential property market stabilised in the second half.

‘The luxury residential property segment remained subdued due to a combination of factors, including strict local mortgage policies, a slowing mainland Chinese economy, capital controls and the ongoing US-China trade war. Investors persisted with a ‘wait-and-see’ attitude towards big-ticket investments,’ the company added.

At the same time the local property market has been seeing rising competition from the neighbouring cities, namely, Zhuhai and Hengqin, with residential transactions totalling 3,792 and 474 in November, respectively, up 69 per cent and 204 per cent year-on-year.

Still, between July and November, there was a slower decline in transactions in the local market, with 3,376 transactions recorded, just 0.1 per cent lower than the same period a year earlier, while average home prices remained stable at HK$9,857 (US$1,267) per square foot.

Meanwhile, during the first 10 months of the year, more than 80 per cent of those buying homes were first-time buyers, with average transaction values at MOP6.1 million, as developers started offering incentives such as flexible financing options in order to drive sales.

The company’s latest financial report indicated that its portfolio, comprising three main assets, was valued at US$311.1 million as at June 30, 2019, reflecting a
7.7 per cent year-on-year decline in valuation.

Concerning prospects for this year, the fund noted that although new Chief executive, Ho Iat Seng, has outlined as his priorities to diversify the city’s economy, the market will have to wait and see if new policies favouring the property sector will be introduced and whether the current restrictive policies impacting the high-end property market will be relaxed.

Nevertheless, MPO stated that Macau’s economy and the city’s property market will remain ‘vulnerable to the spillover effects of the US-China trade war’, which contributed to an economic slowdown in China to 6.0 per cent in Q3 2019, ‘the lowest growth rate since the country began to open up its economy several decades ago’.