The plunge in gambling revenue since 2014Q3 has greatly hampered market sentiment for Macao’s residential market. Compared to 1H2014, before the 37% fall in gambling revenue, sales volume in the residential market dropped 40% in 1H2015, with an 8% reduction in value and 33% fall in number of transactions.
Despite the economic downturn, the Macanese government has refused to alter or cancel the cooling measures implemented. Sellers, recovering from the panic in 2014Q3, have adopted a wait-and-see attitude towards the market as the secondary market fell quiet in 2015. Figures have continued to fall in the first half of 2015 but to a much smaller extent.
Although home prices have dropped 24% from the peak in 2014Q2 and a further drop to an estimated 25% y-o-y drop in revenue by the end of 2015 is expected, home price, in the short run, is still supported by a shortage in supply (only 3,001 residential units were completed last year). The government’s promotion of diversification in the City’s gambling sector would also serve as a stimulus to its economy. Therefore, only a 15% y-o-y drop is expected this year.
However, with an economy relying so much on its gambling revenue and residential housing prices so closely correlated to it, market sentiment for the residential market will remain weak in the future as the City struggles to find another source of income. It is also hard to foresee a rebound in gambling revenue as the anti-extravagance campaign continues in China and the U.S. continue urging greater transparency in American-based casinos to prevent money laundering.
Besides, a downward pressure on residential rental is likely to be seen once the major public and casino projects have been completed causing a lower demand on leased properties from foreign workers. It is also planned that 28,000 public housing units and 4,000 private housing will be developed by 2020, boosting the supply of residential units in the mid-long term. Moreover, the developing and expanding Zhuahai residential market, especially in Hengqin Island, which is only a 10 min drive away from Taipa, is gaining popularity amongst the Macanese and may divert resources from the residential market in Macao as locals choose to buy there instead.