Jones Lang LaSalle Macau (JLL Macau) has urged the Macau government to ease some of the existing curbs on the housing market as the sluggish global and mainland Chinese economies continue to dampen the market, which is expected to see home prices decline by a further 5 per cent this year.
JLL Macau held a mid-year review of the Macau property market on Wednesday. It reported that the capital values of mass and medium residential properties and high-end residential properties only increased by 4 per cent and 1.3 per cent year on year, respectively.
This occurred despite the recovery of the local economy since the lifting of Covid-related travel restrictions earlier this year. The number of travelers to Macau tripled to over 11.6 million in the first half of 2023, and gross gaming revenue also more than tripled in the same period, recovering to about 55 per cent of the pre-pandemic level.
“Although home prices recorded moderate growth in the first half of 2023, the current market indicators are not favourable to the housing market, and housing prices have dropped over 10 per cent from where they were prior to the pandemic,” Oliver Tong, general manager at JLL Macau and Zhuhai, said on Wednesday.
“Under the current market condition, housing prices will be under pressure due to interest rate hikes, a fluctuating stock market, a weak global economy, and a lower-than-expected economic recovery in mainland China, which will affect the economic recovery of Macau as a result,” he added.
JLL Macau expects at least one more rate hike in the second half of the year, and the “high interest rate environment” is expected to continue for at least the next one to two years. Tong believes that “there will be a decline of 5 per cent in home prices this year, provided that there are no changes in the market fundamentals like housing measures.”
“The housing price has already slumped by 10 per cent from the peak during the pandemic, and a further decrease will spell trouble for the market,” he said, adding a steep decline in the property market would also dampen the local economy.
The number of residential transactions totalled 1,793 in the first half of 2023, up by nearly 10 per cent from the same period a year earlier. Despite this recovery, Tong said that the volume of home sales still hovers at “one of the lowest levels historically”.
Lifting three types of curbs
In view of the current market fundamentals, the consultancy recommends that the city learn from Hong Kong’s experience in easing some of the cooling measures in the housing market that have been implemented in the past decade.
Earlier this year, Hong Kong raised the maximum mortgage rates available to some homebuyers, the first relaxation of residential property curbs since 2009, news agency Reuters reported at the time.
“Even though the market has suggested that the government should remove cooling measures for the housing market many times, the government believes housing prices will rise after the removal,” Tong said. “But in Hong Kong, it failed to stimulate market activity after the government relaxed the cooling measures recently.”
He described the property curbs that have also been in place in the Macau market for over a decade as “unrealistic”, explaining that the overall environment had been “completely different now” compared to 10 years earlier.
First and foremost, the government should lift the special stamp duty of up to 20 percent on the resale of a house within two years of being purchased, a cooling measure that has been implemented since 2011, Tong said.
The authorities should also consider loosening the buyer stamp duty to a certain extent, as non-Macau residents are now subject to an additional levy of 10 per cent of the value of a residential property, the property agency said.
“As the government is now looking to attract global talent to Macau, the talent can be exempted from this stamp duty on home purchases, as well as professionals from the Guangdong-Hong Kong-Macau Greater Bay Area that work in the city,” Tong proposed. “The government shouldn’t lift the buyer stamp duty for all non-residents but it should consider doing so for these two types of professionals in Macau.”
In addition, the JLL Macau and Zhuhai general manager also suggested that the administration should lift restrictions on the maximum mortgage rates available to homebuyers, allowing local banks to make their own decisions.
Meanwhile, JLL Macau noted that rents for luxury flats grew 13.7 per cent year-on-year in the first half of the year while those for mass residential units expanded 8.2 per cent due to the gradual return of non-resident workers after the lifting of travel restrictions.
Thanks to the gradual recovery of local tourism, JLL Macau reported that the rental value of prime street shops surged by 9.5 per cent year-on-year during the January-June period of 2023.
“The shopping behaviour and preferences of tourists have changed after the reopening of borders. Therefore, the leasing demand for retail properties is mainly driven by pharmacy, souvenirs, mass market brands, food and beverage retailers,” Tong said.
However, he added that this shift in tourists behavior and the increasing trend of Macau residents traveling and shopping in mainland China and other places had posed challenges for the local retail market, particularly mid-end retailers.
“Rising outbound travel to mainland cities or Hong Kong led to the leakage of domestic spending, dampening the recovery of the retail market. Also, the depreciation of [yuan] would attract more local residents to mainland China for consumption and affect the attractiveness of Macau to mainland tourists in terms of shopping,” Tong pointed out.
