Something strange is happening in Macau’s property market. After a rapid expansion period in 2017 and a cooling off last year, residential sales, which usually follow gaming revenue trends, saw a sharp fall in the first half of this year. Transactions plunged 42.2% YoY, according to DSF statistics. Offices did slightly better, but retail space also took a knock. This is despite the influx of visitors, which were up nearly 25%, and the stabilization of gaming revenues, which were slightly positive.
A leading agency, JLL, says the cause was economic uncertainty due to the China-US Trade War and competitive pressure from neighboring Zhuhai.
“The number of new residential units launched for sale has peaked in the recent two years amidst intensive competition among developers. Due to the external economic uncertainty and the easing home purchase policy in Zhuhai, local developers are facing difficulties to adjust upwards the asking prices of their new projects and need to offer various incentives to boost sales,” said Jeff Wong, Senior Director of Capital Markets at JLL Macau. Very limited new residential supply entering the market in the first quarter may bring challenges to Macau in the short, medium to long term.
The office market fared better, with 2,856 new incorporations registered in Macau in the first five months of 2019, up 10.6% YoY. The continued inadequate supply of new office space meant the overall office vacancy rate maintained at 7% while office rentals saw a moderate growth. In the sales market, the number of office transactions fell by 54.4% YoY to only 77 in the first five months of 2019.
In the retail sector, a total of 195 retail property transactions were recorded in the first five months of 2019, down 41.6% YoY as retail sales fell by 1.9% YoY in the first quarter of 2019 to MOP20.38 billion. The fall was mainly due to the decrease in the sales of household appliances, motor vehicles and communication equipment. During the same period, the total expenditure by tourists recorded a year on year growth of 5.2%.
“Despite the fall of the gaming revenue in the VIP market in the first quarter, the opening of the Hong Kong-Zhuhai-Macau Bridge brought about positive effects to Macau’s tourist industry and helped Macau’s economy remain stable. However, the transaction volumes of various property sectors have declined significantly due to the weakening investment sentiment caused by the global economic uncertainty amidst the ongoing US-China trade war. We expect Macau’s property market to remain stable in 2H19,” said Wong.