Safe haven?

Though the on-going protests in Hong Kong have exacerbated the Macau property market that has been dampened by the macro economic uncertainties, the unrest has also caused some brands to look for openings to set foot here.

During the past few months of protests in Hong Kong over the now-shelved extradition bill, the Hong Kong retail industry has suffered one of the worst recessions in history — confrontational and violent scenes scared off tourists, mainly Mainland Chinese — to the point that some Hong Kong brands and enterprises are now looking to set up presence here, as the Macau tourism has so far remained unscathed from the turmoil, according to local property agencies.

Retail sales in Hong Kong plunged by 23 percent year-on-year in August, worse than the 21.48 percent drop in September 1998 when the city was embroiled in the Asian financial crisis, official data showed. This dismal result came amid a 39.1 percent decline in tourist arrivals to Hong Kong in August, the largest drop since May 2003 when amid an outbreak of severe acute respiratory syndrome (SARS).

“Retail sales will likely remain in the doldrums in the near term, as the worsened economic outlook and local protests involving violence continue to weigh on consumer sentiment and inbound tourism”, a Hong Kong government spokesperson said.

The on-going protests in Hong Kong, as well as other macro economic uncertainties like the trade war between the United States and China, have dampened the Macau commercial property market, with the value declining by 20-30 percent year-on-year in the third quarter, said Roy Ho Siu Hang, director of Centaline (Macau) Property Agency Ltd.

Beyond tourism district

“But we’ve seen more Hong Kong enterprises visiting Macau in the recent times to inspect retail spaces”, he noted. The number of enquiries and shop visits here by Hong Kong and other non-local companies handled by the property agency increased by 20-30 percent in the July-September period from the previous quarter.

“They haven’t only considered the possibilities of retail spaces in traditional tourist districts like downtown, but also in commercial areas like NAPE and Nam Van, as well as Areia Preta, which is in the close proximity of the Hong Kong-Zhuhai-Macau Bridge”, Mr. Ho said.

“In spite of a lacklustre performance in the gaming sector, the steady growth in the number of travellers to Macau is a major appeal for those Hong Kong brands”, he added.

While the number of Mainland Chinese visitors to Hong Kong continued to retreat by 55.8 percent year-on-year during the National Day “Golden Week” holiday, the number of mainlanders coming to Macau — the largest tourism source market for both of the special administrative regions — jumped by 9.4 percent from the previous year during the seven-day holiday starting from October 1, figures from both the Hong Kong and Macau administration show.

Package tours

In the first nine months of this year, Macau received 30.2 million travellers, rising by 17 percent year-on-year, while the number of mainlanders also jumped by 17.7 percent to 21.46 millions. Maria Helena de Senna Fernandes, director of Macau Government Tourism Office, said in October that the 2019 tally of visitors could reach a new record high of around 40 millions.

Nevertheless, Mr. Ho strikes a cautious tone: “It’s a chilling winter for the Hong Kong tourism given the continuing social unrest, so whether and how much the Macau tourism is affected by that would in turn impact the commercial property market here”.

Although the city’s tourism has so far remained in the positive territory, the number of visitors to Macau on package tours has started to feel the pinch from the Hong Kong protests. 

Government figures show that the number of visitors on package tour to the city dropped by 18.8 percent year-on-year to 634,600 in August, the biggest monthly drop since 2016. The package tour visitation maintained a 9.8 percent growth in the first eight months of 2019, though.

Andy Wu Keng Kuong, chairman of the Travel Industry Council of Macau, said the city’s tourism — in particular package tour deals — has felt the effect of the Hong Kong protests since July, because many package tours usually involve a visit to both of the two special administrative regions in one itinerary. The number of package tours from the Mainland to Macau plunged up to 80 percent in the previous Golden Week holiday, he added.

“It’s fortunate that there have been more Mainland Chinese visitors coming to Macau under the IVS [Individual Visit Scheme], thanks to the Hong Kong-Zhuhai-Macau Bridge, offsetting the drop in the package tour visitation”, Mr. Wu said, adding he is still sanguine towards the local tourism prospect though. The bridge, which significantly cuts the land transportation time among the three places, opened to cars in October last year, and has been pinpointed by critics as one of the key drives for the visitation in the past 12 months.

Resorts as top choice

In the perspective of Gregory Ku Ka Ho, managing Director of Jones Lang LaSalle (Macau) Ltd, the prospect of the local commercial property market has been less bright that what Mr. Ho envisages. “A lot of economic data show that growth in tourism visitation is slowing and visitors’ expenditure remains weak, so there are a lot of uncertainties clouding the local commercial property market”, he said.

Latest official figures show the visitors’ expenditure in Macau totalled MOP 15.71 billions in the second quarter of this year, dropping by 4.8 percent year-on-year, the first decline since the second quarter of 2016, when the city was still affected by the anti-corruption campaign in Mainland China. The per-capita spending of all visitors and Mainland Chinese travellers also retreated for three consecutive quarters in the April-June period.

“With a lower sales volume across a wide range of segments from jewelleries to luxury brands, the shop rental level could finish this year with a 5-10 percent decline”, he said, adding that street shops would be more dampened than the retail space in resorts.

According to data from the agency, the rental value of retail property stayed put in the first half of 2019, after dropping by 2.7 percent last year, while the capital value went down by 2.9 percent after falling by 2.4 percent in 2018.

When asked whether more brands were looking into the commercial property market here following the unrest in nearby Hong Kong, Mr. Ku highlighted that Macau has been under the radar of many foreign retail brands in recent years given its rising international status. “But these brands usually consider shopping malls in resorts due to the quality and consumption power of visitors there”, he added.

Hengqin home sales more than quadruple in 3Q19

The number of home transactions in nearby Hengqin more than quadrupled in the third quarter of 2019, as the average value still represents half of the home price in Macau.

According to Centaline (Macau) Property Agency Ltd, the number of residential property transactions totalled 1,068 in Hengqin in the July-September period, skyrocketing by 360.6 percent from the previous year and rising by 74 percent from the previous quarter.

Macau buyers accounted for over 26 percent of property sales in Hengqin, while Hong Kong buyers also translated to nearly 21 percent of the total sales over the same time period.

Centaline said many Hengqin housing projects launched new sales in the July-September period to attract buyers, particularly those from the two special administrative regions, thus spiking the number of transactions. Huafa Square, a 1,720-unit residential complex developed by Zhuhai conglomerate Huafa Group, was the top-selling home project in the third quarter, with a total of 339 units transacted. 

The average home price in Hengqin was RMB 43,444 per square metre as of September, or MOP 49,629.54 a square metre, the property agency noted, representing less than half of the Macau average home price of MOP 103,436 a square metre in September.

The total number of property transactions — including home, office and retail categories — reached 1,949 in Hengqin in the third quarter, rising by nearly 94 percent from a year earlier. With the expected opening of the new immigration and customs building in the Hengqin Port between the island and Macau by the year-end, as well as more projects and infrastructure on the island coming online, Centaline expects the property sales in the fourth quarter will continue to rise.

The new immigration building is part of the on-going construction of the new Hengqin Port, which will be fully completed by 2022 and could handle 80 million crossings a year.

The nation’s top legislature — the National People’s Council — approved in October a bill stating that the jurisdiction of the usage of Hengqin Port will be granted to the Macau government, equalling to about 167,720 square metres in gross area. Thanks to this move, crossings between Macau and Hengqin will only be subject to one customs clearance procedure instead of two, facilitating the movement of people and goods.

For Zhuhai as a whole, the number of property transactions in Zhuhai totalled 17,506 in the third quarter, nearly doubling from the previous year, Centaline said. Home prices in Zhuhai averaged RMB 22,847.2 a square metre as of September, or just a quarter of the Macau home price.

The property agency noted that more Hong Kong buyers have snapped up properties in Zhuhai so far this year, following the opening of the Hong Kong-Zhuhai-Macau Bridges, which has greatly reduced the land transportation time among the three places.