Special Report – A pandemic-induced frozen real estate market

And the downward trend is expected to continue, experts say

Macau Business | September 2022 | Special Report | Housing: A place to call home


“The property market [in Macau] is basically frozen at the moment, and the phenomenon may continue for another quarter or even longer until the economy’s growth engine restarts, if the experience of neighbouring cities can be taken as a guide,” Oliver Tong, General Manager of JLL Macau and Zhuhai, tells Macau Business.

As lawyer Tirso Olazábal explains, it was true, at least initially, that “although the Covid-19 outbreak significantly impacted Macau’s economy in general, the property market proved to be somewhat resilient over the past two years, especially in terms of pricing for residential property. It is commonly understood that such resilience is due to the stable housing demand and the limited offer on new residential housing in the market.”

In fact, the first half of 2021 even showed signs of recovery, and property transactions as well as prices have increased year-on-year. However, Mr Olazábal continues, “this recovery has been rapidly disrupted by several events such as the government crackdown on corruption, the lockdowns imposed by the government, worldwide political uncertainty enhanced by the war in Ukraine and lately the increase of interest rates.”

In addition, the recent “lockdown” of July 2022 “is expected to put even more pressure on the property market,” the MdME Law Partner predicts. The estimated volume of transactions in June and July 2022 may be the lowest in recent years, and analysts foresee property prices decreasing by 10 to 20 per cent.

The total number of house transactions decreased by 50.5 per cent to 1,632 in the first six months of this year, compared with the same period in 2021. Statistical data from the Financial Services Bureau indicates that the average price of homes sold in 1H22 fell by 8.9 per cent to MOP92,134 per square meter. In annual terms that makes for the lowest value since the first quarter of 2017 (MOP90,858).

Henry Lei of the University of Macau’s Department of Finance and Business Economics, Faculty of Business Administration, also paints a very pessimistic portrait: as indicated by the Statistics Bureau, housing prices for March–May have recorded a 0.6 per cent drop. “Such a declining trend is expected to continue, attributed to the outbreak, especially after the Macau SAR government announced the suspension of non-essential economic activities from 11 to 18 July 2022.”

According to Professor Lei, “This should further weaken the sluggish Macau economy and may worsen the unemployment problem with more SMEs going bankrupt, leading to poor purchasing power and serious confidence issues which will bring about negative impacts on the housing market. All in all, the housing market is likely in a slump with reduced transactions and probably a further downward adjustment in price for 2022.”


“Macau – the city as a whole and its housing market, as well – is facing one of the most significant challenges of the past 10 years due to the recent wave of the COVID-19 pandemic that has led to a pause in many business activities. The rising unemployment rate, contracted gaming revenue and interest rate hike have also exerted pressure on the economy.” – Oliver Tong

Oliver Tong calls for the Government to “seriously consider revisiting all its major housing policies, such as the mortgage loan ratio, to make sure they are really responding to the needs of the market and citizens.”

Tirso Olazábal, who believes “it may take us several months to see signs of recovery in the property market or even years to see a full recovery in all the main categories of real estate such as residential, commercial and office,” advocates that “in order to speed up such recovery certain measures should be envisaged by the government, such as re-promoting the 4% loan subsidy for residential housing, new measures on mortgage ratios, etc.”

Mr Tong reminds us that “Macau has made it through a number of huge challenges in the past few decades with support from the Central government.” Therefore, he believes the current situation “may improve once the current COVID-19 pandemic is under control and the border reopens. It will also help if the local and central governments implement further subsidies or incentive measures.”


Singapore as a model

The impact of COVID-19 in recent years and the blow to Macau’s gaming industry have given Macau’s housing prices room to fall.

“However,” Edmund Li Sheng counters, “in the past few years, property prices have not declined by more than 20 per cent, the supply of small and medium-sized houses is still insufficient and a housing protection mechanism for homeless households and low-income people has not yet been established.” explains of.

According to the Professor of Political Economy and Public Policy from UM’s Department of Government and Public Administration, given that “public housing, as a public policy with a welfare nature, does not develop steadily in Macau, especially in the context of an economic recession and public health crisis,” the only way to tackle the current housing crisis is “to understand the problems faced by the different sectors of society.”

He tells Macau Business, “The Government can learn from the Singapore housing model. Nearly 80 per cent of Singaporeans reside in government-built apartments, whereas social and economic housing only account for about 20 per cent of the total number of residential units in Macau. Therefore, ensuring that the housing needs of low-income people are met is an urgent problem the Macau government needs to address.”


The auction law

“We believe private property auction could offer a valid and efficient alternative that would ensure property is transacted in a secure, fast and transparent manner,” lawyer Tirso Olazábal explains to Macau Business. For him, an auction “is a safe manner in which to transact a property, as it is legally binding for both parties and offers a high degree of security for the seller, given that prior due diligence on the property has been made before the property is available at auction.”

Mr Olazábal stresses, “Selling property at auction has become a popular choice for many property owners and investors, due to the speed and guaranteed nature of the transaction once the auction ends. It is a tried-and-trusted, straightforward process that takes advantage of an auctioneer’s local knowledge, attracting buyers who can proceed with a purchase rather than those in the middle of a property chain.”

Not to mention, “Property auctions are quite common abroad, even in nearby jurisdictions such as China.”

Not in Macau, however. “In our opinion, this might be due to lack of clarity in the legal framework. In fact, in Decree-Law no. 47/98/M (on the Legal Framework for Issuing Licenses for Specific Economic Activities) it is unclear where a property auction might fit within the framework of economic activities, namely whether the organization or marketing of a property auction event would be deemed a real estate agency activity (which is a regulated activity subject to license and supervision by the Housing Bureau).”

The MdME Partner continues: “In recent decades, especially before the outbreak of COVID-19, very few property auction events (perhaps none) were held in Macau, with the usual property transactions through property agents being deemed sufficient to accommodate the property market. However, given the economic environment and social changes, property auctions, which can involve partnerships with property agents, should be seriously considered as a valid alternative to the traditional ways of transacting property, and new legislation should be implemented in this regard.”

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