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News Release

Hong Kong and Macau

Jones Lang LaSalle: A Buoyant Residential Market amidst a Promising Economic Environment in Macau


On the back of a more promising economic environment, Macau’s residential market continued to be buoyant in 1Q10 following its strong rebound in 2H09 although the rising uncertainties in the global economy has led to a relative consolidation through the second quarter. Residential capital values continued to ride on a rising trend in 1H10, according to Jones Lang LaSalle in its Macau Mid-Year Property Review today.
 
Macau saw a strong 30.1% y-o-y GDP growth in 1Q10, mainly driven by the city’s record-breaking growth in the gaming sector.  The city’s gaming revenue grew by 67% y-o-y in the first six months of 2010 to a total of MOP 86.4 billion.
 
Macau’s business sector and labour market also showed improvement, with the number of newly incorporated companies registered a 26.1% growth in the first five months of 2010 while unemployment rate returned to a low level of 2.9% in May.  The city’s medium income also reached a new high of MOP 9,000 per month in 1Q10 with its private consumption expenditure recorded a 2.3% y-o-y growth in 1Q10, suggesting the domestic retail market was on the rise.
 
Total visitor arrivals to Macau increased by 15.8% y-o-y to 10.3 million for the first five months of 2010.  Out of which, more than 50% were from Mainland China. Its total tourism receipts were recorded at MOP 45 billion in 1Q10, up 12.8% y-o-y.
 
The various casino-resort projects previously been suspended on Cotai Strip will likely be reactivated shortly. Sands China announced the reactivation of construction works for Cotai Lot 5 and 6 in 3Q10.  Scheduled for completion in 3Q11, the project will create 8,000 – 10,000 job opportunities, directly creating some momentum for Macau’s local labour market.  At the same time, Galaxy Entertainment also announced their plan to open Galaxy Macau (Phase I) in early 2011.
 
‘A strong and sustained level of gaming revenue and GDP growth, a rising number of incorporated companies, falling unemployment rates, rising incomes and a growing number of visitor arrivals all combined to suggest that Macau’s economy has recovered from the global financial crisis. 
 
Coupled with the reactivation of construction projects on the Cotai Strip which will further strengthen the local labour market, we expect to see a stronger local consumption and property investment demand in Macau,’ remarks Marcos Chan, Jones Lang LaSalle’s Head of Research, Greater Pearl River Delta.
 
Residential
The residential market in Macau, both the high-end and mass and medium sectors, were on a general uptrend in 1H10. A total of 7,713 residential sales transactions were recorded for the first five months of 2010, which is already more than 50% of the total number recorded in 2009.
 
For 1H10 as a whole, capital values and rents for high-end residential properties grew by 3.2% and 1.5%, respectively, compared with end-2009.  Growth for mass and medium residential properties were even stronger, with capital values rising by 4.4% and rents were up 7.0% over the same six months.
 
In terms of supply, a total of 4,530 residential units are scheduled for completion in 2010, including The BAYVIEW and The Riviera Macau.  Tower 1, 2 and 5 of The BAYVIEW were launched in March this year with prices ranging from HKD 2,600 to HKD 3,800 per sq ft (gross).  For The Riviera Macau, as of end May, over 230 units were sold for an average price of HKD 3,500 per sq ft (gross).
 
‘With quite a number of new projects launched for pre-sale during the first five months of 2010, a relative increase was seen in the percentage of the number of units transacted in the primary market.  During the first five months of 2010, 21% of the 7,713 residential transactions were for primary units, much higher than the 5% recorded in 2009,’ remarks Jeff Wong, Jones Lang LaSalle’s Head of Residential in Macau.
 
‘Macau’s real interest rates will likely remain in the negative regime for the rest of the year, providing a favourable environment for property investment.  Better job security coupled with rising incomes may fuel demand from local end-users, while the limited new supply in 2011 and 2012 will lend support to residential prices.  The outlook for Macau’s residential market is expected to be positive,’ adds Wong.
 
Office
As companies scaled back their operations in Macau or moved out from the city, the vacancy level in Macau’s office market has been rising, with vacant space concentrating in the NAPE area.  However, Grade A office space was less affected as tenants go for value-for-money options.
 
In line with other property sectors, improved sentiment was seen in the Grade A office market in 1H10. The second quarter saw Grade A office capital values and rents rising by 7.3% and 1.8% q-o-q, respectively.  For 1H10 as a whole, capital values and rents were up 11.7% and 1.8%, respectively. 
 
‘As capital values rose much stronger than rents, Grade A office investment yields compressed further in 1H10.  However, with the reactivation of construction works on Cotai, a relative pick-up in leasing activities is expected to be seen. The tight future supply situation will remain intact,, until a total of 400,000 sq ft of office space is potentially due for completion at Nam Van Lake Lot A6 in 2012, ’ comments Gregory Ku, Jones Lang LaSalle’s Managing Director in Macau.
 
Investment
There were several eye-catching investment deals in 1H10,  highlighted by the en bloc sale of a commercial building at A Largo do Senado for about HKD 400 million; the sale of a shop at Rua de S. Domingo for about HKD 45 million; the sale of the office portion of a building with car parks in NAPE for about HKD 700 million; and the sale of a residential site in NAPE for approximately HKD 960 million.