The global pandemic has little impact on the rising Hengqin housing market, driven by the grand development vision from the authorities in Guangdong and Macau
As the global pandemic of the novel coronavirus (COVID-19) has dampened the residential market here and mostly elsewhere, the nearby Hengqin island, however, is another story. Due to the policy support and the grand development blueprint, as well as the recent relaxation of travel arrangements between the two sides, analysts believe there is still room for growth in the home market of the so-called ‘backyard of Macau’.
Figures from the Chinese real estate agency and institute Hopefluent show the number of home transactions in Hengqin, part of Zhuhai, Guangdong province, totalled 1,428 in the first six months of 2020, jumping 68.8 percent from 846 in the same period a year earlier.
The result was in stark contrast to the overall Zhuhai market, which recorded a year-on-year decline of about 15 per cent to 12,259 transactions in the first half of this year, quenched by the virus outbreak that was first reported in Mainland China in January. Concerning Macau, latest figures from the Financial Service Bureau show a year-on-year decrease of 22.4 per cent in the number of home sales to 3,040 in the January-June period.
Industry insiders note the robust performance in the Hengqin residential market this year amid one of the worst public health crises in generations is mainly due to the push by the authorities in turning the island into a platform for Macau to diversify its industrial structure and to achieve further integration with the motherland.
In his maiden policy address unveiled in April, Macau Chief Executive Ho Iat Seng, placed great emphasis in the nearby island. Describing Hengqin as, “A path to new opportunities regarding Macau’s pursuit of further development”, the official noted at the time the city would, “spare no effort in its cooperation with the Guangdong government and the Zhuhai government, regarding collaboration in relation to Hengqin.”
This vision is also shared by the Zhuhai administration, which describes this year as the, “Opening chapter of the joint development of Hengqin between Macau and Zhuhai,” with a detailed action plan listed in its working report for 2020.
Property agency Centaline pinpoints a hike of home sales in Hengqin in the past two years, given the gradual completion of infrastructure on the island, as well as commercial lenders in Macau and Hong Kong providing direct mortgage loans for homebuyers from the two special administrative regions in Hengqin projects. The number of residential transactions in Hengqin totalled 3,188 in 2019, surging by more than 226 per cent from 2018, figures from the agency show.
Li Yu, general manager of Hengqin division of Centaline, says the Hengqin housing market is majorly dominated by small flats, as most homebuyers are investors and small flats translate to a low investment threshold. “Apart from the rising sales, the average home price also enjoyed a stable rise in the first half of this year,” he illustrates. This is due to the relatively limited supply of residential projects, as many projects in Hengqin are zoned for office, commercial and mixed uses, he adds.
Figures from Hopefluent show the average home price in Hengqin amounted to RMB46,977 (MOP53,686.5 / US$6,729.5) a square metre in the first six months of 2020, up by about 10 per cent from a year ago. It is nearly double the average home price in the overall Zhuhai market, but only represents about half of the Macau price. According to the Financial Service Bureau, the price of housing transactions in the in the SAR in the first half of this year averaged MOP100,564.5 (US$12,570.6) a square metre, down by 8.2 per cent year-on-year.
Amid the upward momentum, Mr. Li notes: “The proportion of Macau and Hong Kong homebuyers in Hengqin has shrunk so far this year due to the border restrictions and quarantine arrangements in prevention of COVID-19.” Homebuyers from the two special administrative regions used to dominate the Hengqin market, accounting for more than half of the sales, but homebuyers from other places in Guangdong besides Zhuhai, came to the top in the first half of this year with a share of 21.11 per cent, followed by 17.5 per cent for Zhuhai buyers, 16.11 per cent and 14.72 per cent respectively for Macau and Hong Kong investors.
However, it is expected Macau buyers will become active again in the remainder of 2020 with the recent relaxation of travel arrangements. The Guangdong authorities lifted the 14-day mandatory quarantine measure on 15 July for people entering the province from Macau. People, who have entered Guangdong from the city, can move within the nine cities of the Guangdong-Hong Kong-Macau Greater Bay Area in the province, while Macao residents and mainlanders that work or live in Guangdong can move within the whole province, the administration added. This move signifies the start of restoring the normal movement of people between the two sides.
Fong Wai Hong, chief sales director of another property agency Ricacorp Macau, believes there will be a, “huge surge” in home sales in Hengqin in the second half of 2020, as, “a number of new projects will launch sales campaigns, together with the measure of allowing Macau registered vehicles [to enter Hengqin].” The Hengqin authorities first allowed eligible Macau-registered vehicles to drive across the border in 2016 with an initial quota of 800. The quota has been expanded over the years, with the latest revision made on 20 July this year, which doubled the quota from 2,500 to 5,000.
Mr. Fong highlights one of the new projects to launch sales later this year is Hengqin Integrated Development, developed by conglomerate Shun Tak Holdings in a joint-venture with mainland real estate firm Perennial Real Estate Holdings. “The Shun Tak project is conveniently located, just a walk of less than two minutes from the Hengqin Port, and the minimum down payment [for a flat] is only RMB700,000,” he illustrates. “These will attract the attention of Macau buyers.”
Situated next to the border checkpoint connecting the island to Cotai, the RMB263-million Hengqin Integrated Development project boasts twin towers. One is used for office space, while the 51-storey tower features flats, the Artyzen hotel brand, a clubhouse and retail facilities. According to sources in the market, the developer will officially launch the pre-sale for 426 flats in the project this month, but it has started accepting subscriptions from potential buyers since the sample flats were made available for viewing last month.
The lowest price for a flat in the Shun Tak project, which is scheduled to be completed this year, is expected to fetch at least RMB2.3 million, or over RMB50,000 per square metre, the sources say, adding that the size of the flats range between 44 square metres and 125 square metres.
A real estate source familiar with the both the Macau and mainland markets, nonetheless, warns potential homebuyers that they need to have thorough considerations before making any decision. “The development of Hengqin is still progressing and it might still take at least 5-10 years before reaching an advanced stage,” the source says, speaking on conditions of anonymity.
“The home price is expected to only fluctuate within the range of some RMB40,000-50,000 a square metre in the meanwhile,” the source continues. “This means buyers should not expect there is any lucrative return in the short run as the Hengqin market is up for mid-to-long term investments.”
“There are also risks that should the development of Hengqin fail to reach its vision, the price will drop drastically,” the source adds.
Macau New Neighbourhood
As residential projects in nearby Hengqin are popular among Macau investors, the Macau government is also developing the so-called, “Macau New Neighbourhood” project on the island for residents.
The authorities from the two sides officially inked an agreement in April this year, with Hengqin selling 194,000 square meters of land to Macau at RMB5.35 billion, (US$0.77 billion) for the project. Featuring about 3,800 flats in 27 blocks only to be sold to Macau residents, as well as commercial, education, medical and social facilities, “Macau New Neighbourhood” is undertaken by Macau Urban Renewal Limited, a public firm set up by the Macau government.
The Macau government first came up with the possibilities of developing a cross-border residential project in Hengqin in 2015, and, “Macau New Neighbourhood” aims to facilitate further integration between Macau and the mainland, and to help the city resolve its housing shortage problem over the lack of land supply
The authorities have not revealed the asking price of the flats yet, but claimed the homes would be sold to residents at a level similar to the overall construction cost of the project.
Macau Urban Renewal Limited is expected to complete the project within four years after officially receiving the land from the Hengqin administration, and it will afford the project costs through corporate financing without the use of public money.