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News Release

Hong Kong and Macau

Jones Lang LaSalle: A Buoyant Residential Market amidst low interest rate and strong demand in Macau


Macau’s GDP expanded strongly y-o-y in the first three quarters of 2010, supported by the robust tourist and gaming sectors.  Demand for residential properties, both high-end and mass alike, was strong during the year, leading to a rise in capital values for both market segments, according to Jones Lang LaSalle in its Macau Annual Property Review today.

Backed by the global economic recovery in 2010, Macau’s economy saw a strong rebound.  For the first three quarters of 2010, Macau’s GDP rose by 25.3% y-o-y in real terms, reaching MOP 146.4 billion.  The tourist and gaming sectors were the key growth drivers, contributing to a strong 33.5% y-o-y growth in export of services during the period.  For 2010 as a whole, the Macau government expected its GDP to grow strongly by not more than 30%.

In 2010, Macau’s gaming revenue reached a record high of USD 23.5 billion, representing a y-o-y growth of 57.8%.  It is worth noted that Macau’s gaming revenue (USD 21.2 billion) was more than a quadruple of that of Las Vegas (USD 5.3 billion) for the first eleven months of 2010.  Macau’s total visitor arrivals for the first eleven months of 2010 was recorded at 22.7 million, which already exceeded 2009’s full-year number.  The visitors were mainly from Mainland China and Hong Kong, amounting to 12 million and 6.8 million respectively.

On the back of Macau’s improved business environment, an increasing number of companies entered the city to set up their offices in 2010.  According to DSEC figures, the total number of new companies incorporated in Macau reached 2,779 in the first eleven months of 2010, up 18.7% y-o-y.  The wholesale and retail sector continued to make up the largest portion at 38.2%.

Having experienced more than a year’s negative growth following the global financial crisis in 2008, the number of imported workers was back to the positive growth track from June to November in 2010.  With the opening of Galaxy Macau, the reactivation of Sands Cotai Lot 5 & 6 project and the ground-breaking of the LRT in 2011, the number of imported workers in Macau will likely to continue on the rise.

‘The year of 2011 shall see Macau’s economy continue rising strongly, with the construction sector taking a more active role while the gaming and tourism sectors to further benefit from the gradual appreciation of the RMB and Mainland China’s sustained economic growth. In a market with strong expectation on economic and employment growths, coupled with a low interest rate environment, property demand is set to remain strong,’ remarks Marcos Chan, Jones Lang LaSalle’s Head of Research, Greater Pearl River Delta.
 
Residential

On the back of the continuous low interest rate environment and the positive economic sentiment, the overall residential market performed very well in 2010.   Both the primary and secondary segments recorded a growth in their numbers of Sale and Purchase Agreement.  From January to November 2010, a total of 16,035 Sale and Purchase Agreements were recorded, which already exceeded 2008’s and 2009’s full-year numbers.  Out of the which, 11% was originated from the primary segment while 89% was from the secondary segment.

In the primary residential market, several new projects such as Lake View Tower, The Fountainside  and The Residences & Apartments Mandarin Oriental Macau were launched and were well received by the market.  Demand came from mainly investors while end-users were also interested in some of the soon-to-be completed large-scale developments like The BAYVIEW, in which a total of about 450 units were sold for HKD 1.7 billion.  In the secondary market, stimulated by the government’s housing subsidy schemes, end-users were very active and remained as the main source of demand for residential units, especially those in the mass and medium market.

In terms of capital values, those for the high-end residential market rose by 9.6% y-o-y for 2010 as a whole, following the 6.2% growth for the first half of 2010.  For the mass and medium residential market, capital values recorded a full-year growth of 17.8% y-o-y. 

On the leasing side, rents for high-end residential properties rose by an average of 4.8% y-o-y in 2010, while those in the mass and medium market rose by 10.9% over the same year.

‘Statistics showed that local end-users have replaced overseas investors as the major source of demand for Macau’s residential properties after the global financial crisis.  Before 2008, about one-third of the residential demand were from foreign investors, but gradually reduced to no more than   10% in the last 24 months,’ remarks Jeff Wong, Jones Lang LaSalle’s Head of Residential in Macau.

Several new projects are scheduled for completion in 2011, providing a total of 2,486 units, less than that of 3,423 units in 2010. More notable projects include One Grantai, The Riviera Macau and Lake View Tower. 

‘Macau’s economic outlook is expected to remain positive in 2011, underpinning the city’s residential demand for both self-occupation and investment purposes.  While holding costs are anticipated to remain low that provides a favourable environment for residential investment, the reducing new supply in 2011 and 2012 will strengthen developers’ pricing power.  On the leasing side, we expect that expatriate demand will likely rebound with the reactivation of some construction projects and the opening of new casino resorts,’ concludes Jeff Wong.
 
Office

Benefited by the rebounded global economy, Macau’s business sentiment improved in 2010.  The number of company formation recorded in the first 11 months of 2010 was 2,779, representing an 18.7% y-o-y increase over the same period of 2009.  This helped to strengthen office leasing demand for Macau in 2010.  On the other hand, expansion activities were also seen in the public and private sectors, which helped maintain office vacancy rate at a stable level.  As at the end of  2010, the overall office vacancy rate stood at 24%.  The year of 2010 saw office rents rising by 1.8% y-o-y.

Following two years’ negative growth in 2008 and 2009, the office sales market regained momentum and recorded a positive growth in its capital values, rising by 14.7% in 2010.

‘Entering 2011, we expect that Macau’s office market will remain stable.  Though a pick-up in demand is anticipated with the reactivation of construction projects in the city, the magnitude will be relatively mild.  New office demand will mainly come from the suppliers and service providers for the new construction schemes while government departments will continue to be a major source of demand for office expansion and relocation. The limited supply of quality office stocks in Macau created a constraint for the development of its office market,’ comments Gregory Ku, Jones Lang LaSalle’s Managing Director in Macau.
 
Investment

There were several eye-catching investment deals in 2010, including the en-bloc sale of two office buildings that sold for HKD 700 million and HKD 270 million respectively, the sale of three sites that sold for HKD 256 million, HKD 960 million and HKD 1.75 billion respectively, and the sale of a retail shop for HKD 45 million.  All of the properties were located in Macau Peninsula and purchased by either local investors or Mainland China investors.