Property

Macao Property Market 2015 Review and 2016 Outlook

Macao Property Market 2015 Review and 2016 OutlookMacao’s GDP has shown a negative growth for the 5th consecutive quarters in 3Q2015, falling 21% y-o-y in the first 3 quarters of the year. During the year, the city’s gaming revenue, the most important contributor to Macao’s GDP, has fallen 34% in 2015 to MOP 231.8 billion, many other important industries, such as tourism and the retail sector, have also been greatly affected by the weakening gaming industry, leading to a generally dim economic environment.

In the property market, launches of uncompleted units have been slowed down since the implementation of the pre-sale law in Macao. This, combined with the little land supply in the city, has greatly hampered supply in the primary market. At the same time, in the secondary market, home owners are not very willing to cut prices as most have enough capital on hand. Both buyers and sellers have taken a wait-and-see attitude as the market sentiment grows weak. Only around 6,000 transactions were recorded in the secondary market in the whole of 2015, representing a 20% fall from 2014’s 7,600 cases. Yet, prices have begun to fall since 2Q2015 in an accelerated manner, with prices falling over 30% m-o-m in 4Q2015 to around MOP 38,000 per sq ft. The falling prices have increased rental yields of residential properties. Yet, despite the drop in prices, rental yield is still at low level of around 2%, deterring investors from entering the market.

Looking forward, as the fall in gaming revenue begins to slow down, the gaming industry is expected to remain relatively steady in the coming year, making another huge slide in GDP in 2016 unlikely. Moreover, the Macao government is actively developing other industries for a more diversified economy, seeking income from areas other than the gaming industry that it is currently so reliant on. At the end of 2015, the Chinese government has granted Macao control over its surrounding sea to help boost its economic development. Many opportunities, such as the development of marine tourism, may come from the expanded jurisdiction. The government is also planning for Macao’s cooperate with the nearby Hengqin in a wide range of settings. More policies to help Macao’s economy, such as plans to set up a Renminbi clearing platform in Macao, are promised by the Chinese government.

Notwithstanding the positive effects of the above stimulus policies, it must be noted that the slow-down of the Chinese economy and the depreciation of the Renminbi may lower mainland tourists’ incentives to visit Macao, affecting the city’s economy. Moreover, the interest rate hike may also have a negative influence on Macao’s property market.