Charm City

Macau’s boutique developers offer unique investments rarely found in Hong Kong

The Hong Kong investment market remains firmly rooted in new product and glittery towers. Reasonable enough in a city with limited land supply, but not very exciting. For every handful of buildings that are torn down and replaced with a shiny skyscraper, there are one or two units, a small building if we’re lucky, that are retrofitted and turned into unique homes.

Pride in and active preservation of its history is one of Macau’s strengths. For every 226 in Sheung Wan, there’s one in Macau — a much smaller market with fewer properties like it to choose from. For investors looking for just that kind of real estate, at a fraction of Hong Kong prices but with similar rental yields, Macau is starting to look better every day.

Following the hiccoughs of 2008 and a clutch of cancelled projects (the massive Macau Studio City remains in limbo), the second SAR seems to be back on track. Most investors still buy in spots on the peninsula — in luxury developments like One Central or Grand Cotai — and increasingly in expatriate staff hotbeds like Areia Preita, just north of the ferry terminal and home to developments like La Residencia and La Cite. But for the adventurous investor, off the beaten track is where the fun is.

From her office a short jaunt from Senado Square, Suzanne Watkinson plays property matchmaker as managing director of Ambiente, one boutique developer in a handful, which trolls that unbeaten track for hidden gems. Watkinson counts relocations and leasing among Ambiente’s services, but it’s her eye for those gems that recommends her. Watkinson doesn’t have any high-rises in her stable of properties, preferring to focus on Macau’s distinct personality and intense Europeanism in her properties.

“Our investors tend to be expatriate residents with a long-term view. They like the Macau story and the charm. They have an affinity and affection for it,” she explains of Ambiente’s specialty. “It’s not only a money gain. It’s a matter of, ‘Let’s dip our toe in the water, Hong Kong’s gotten ridiculous. What’s happening across the water?’ People don’t want to pay extra hundreds of thousand of dollars for blocks. They want charm that speaks of memories of weekends that were fun.”

With Macau on a growth cycle again, the long-term may pay off. The Hong Kong- Zhuhai-Macau bridge mega-project is seemingly on track, and next up is the massive Heng Qin Island development right next to Cotai in Zhuhai. That’s been tapped as the next CBD in the immediate area and will allegedly include a Chinese medicine park and space for Macau’s university. Rumours of a convention centre to complement planned tunnel access to the island in order to help it morph into another Shenzhen abound, among others.

“[Authorities] are thinking of six-day visa-free access and making it easier to get funds in and funds out. These have yet to be confirmed but may be on the table,” says Henry Brockman, director at investment firm Trate Capital Limited. “It’s going to be largely property based, so restrictions should loosen in order for foreign investors to buy there.”

Whether Macau can maintain its level of growth remains to be seen, but Singapore and Dubai are both getting into the game of gaming. Clearly the powers that be believe Macau is in a strong enough position to continue granting concessions that will keep the staff coming in. “Turnover in gaming this year will be five times what it is in Las Vegas,” Brockman reminds. The 2008 table cap also makes a difference, as it limits each concessioners total tables and makes holding on to one’s table numbers crucial. “You’ll never see another Sofitel, where a third party built a hotel and then went to one of the concessioners and said, ‘Can you run a casino for us?’ because of that table cap.”

Watkinson and Brockman are confident in Macau’s alternate investment strengths. Brockman sees the market in two distinct types: luxury investments that are popular with junkets and commodity-style investments. Capital appreciation is strong, but Macau’s rental yields have traditionally been low — unless you have real estate with a rarity value. “There’s definitely a niche for slightly older and underappreciated properties … Put a bit of love and care in it and make it a home someone wants to live in and people pay premium rent for that. The main blockage over the last few years is that Macau has been reluctant to let in more non-resident workers, but in practise they’ve been loosening that over the last year. The pool is growing,” Brockman theorises. Of her investors, Watkinson puts it simply. “They’re people who aren’t afraid of sitting on the property and letting us manage it for five years.”

Character driven property is relatively plentiful in Macau, and it’s scattered across the city instead of clustered in one spot. “You can find your little gem almost anywhere. That’s part of the fun for investors I think,” Brockman says. Best of all, Macau’s inherent respect for its heritage makes local banks less likely to run screaming at the sight of a 30-, 40- or 50 year-old property. “As a banker I’ve noticed that there’s less of a discount here for old properties than in Hong Kong. Hong Kong banks have this mania about only giving a mortgage for brand new or 10-year-old buildings. If you go to a bank in Hong Kong and say you’re buying a beautiful property on Kotewall Road that was built in 1959 they [won’t] give you a mortgage for that. Or you’ll get 40 percent. And valuations in Macau are still decent.” The difference in Macau grows bigger every day.