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News Release

Hong Kong and Macau

Jones Lang LaSalle: Macau’s Residential Prices Stay Firm amidst Tight New Supply


HONG KONG AND MACAU, 8 February 2012 – Macau’s GDP expanded strongly in 2011, with the city’s export of services remained the key driver.  Demand for residential properties, both high-end and mass alike, was strong during 1H11, but it contracted significantly in 2H11 with the government’s implementation of Special Stamp Duty (SSD) in mid-June to cool the market, according to Jones Lang LaSalle in its Macau Annual Property Review today.

During the first three quarters, Macau’s GDP recorded a strong growth of 21.8% y-o-y, driven mainly by the gaming and tourist sectors.  On the back of the phenomenal economic growth, Macau’s private consumption expenditure was registered a y-o-y growth of 9.5%.  The city’s fixed capital formation resumed its positive growth track and recorded a strong growth of 13.4% y-o-y, boosted by the massive entertainment projects as well as the city’s infrastructure developments like the LRT.

In December 2011, Macau’s unemployment rate further declined to 2.1%, which was the lowest since 1991.  Technically speaking, the city was in fact at its full employment level, with its median income further increased to HKD10,000, up 11% y-o-y.  The number of imported workers also grew to over 92,000 as of October 2011.

For 2011 as a whole, Macau’s gaming revenue reached a record high of MOP 267.8 billion, representing a y-o-y growth of 42.2% and was about six times of that of Las Vegas.  Macau’s total visitor arrivals in 2011 reached 28 million, up 12.2% y-o-y.  Visitors from Mainland China continued to be the dominant in Macau’s inbound tourist profile, which grew strongly by 22.2% y-o-y.

'Notwithstanding the uncertain economic environment externally, Macau’s economy is likely to remain strong backed by its robust gaming and tourist sectors.  Macau’s property market has tended to be local driven that it is believed that it will remain stable on the back of the promising employment environment,’ remarks Marcos Chan, Jones Lang LaSalle’s Head of Research, Greater Pearl River Delta.
 
Residential

The residential market significantly slowed down in 2H11 after the government’s imposition of the Special Stamp Duty (SSD) in mid-June.  According to the DSEC figures, a total of 2,194 Sale and Purchase Agreements were recorded in 3Q11, plunged by 73.4% q-o-q.  In October 2011, the number of residential transactions even fell to 606, the lowest monthly record since May 09.

As mentioned before, Macau’s residential market has become more and more locally driven.  In 2011, out of the total 17,000 residential transactions, only 12% was originated from foreigners.  It was 10% in both 2010 and 2009.

Capital values for high-end residential properties rose by an average of 15.2% y-o-y in 2011, despite of the slower growth momentum in 2H11.  For the mass and medium residential market, capital values recorded a growth of 10.6% y-o-y. 

On the leasing side, with the strong expatriate demand led by the opening of new gaming facilities, the average rental value of high-end residential properties grew strongly by 22.6% y-o-y in 2011.  For the mass and medium market, the average rental value rose by 25.3% y-o-y.

A total of 1,188 units were completed in 2011, in which over 90% of them were pre-sold.  New supply to be entering the market between 2012 and  2014 is estimated at about 6,100 units, however, over 4,700 units out of which have been sold.  As such, competition in the primary sales market will remain negligible.

'The residential market in Macau is expected to remain subdued in the immediate future, with weaker investor sentiment and tighter bank credit availability.  Sales volume is likely to remain low at least for the first half of 2012.  However, backed by low holding costs, healthy labour market conditions and tight supply in the pipeline, we do not expect to see a major correction in the city’s residential prices,’ says Jeff Wong, Jones Lang LaSalle’s Head of Residential in Macau. 

'With the growing number of imported workers, on the back of the construction works for the LRT and the other private sector projects at Cotai, Macau’s residential rental is expected to remain stable or see further growth, lending support to the city’s residential capital values,’ adds Jeff Wong.
 
Office

Boosted by the expansion activities by the government and the corporations, demand for offices in Macau had gained momentum.  The number of new incorporations registered in Macau totalled 2,529 in the first three quarters of 2011, representing a 12.2% y-o-y growth.  Demand for offices in the leasing sector continued to grow, leading to a fall in average vacancy rate to 18% in 2011 from 24% in 2010.

Overall speaking, the occupancy levels in the major office buildings in Macau improved in 2011.  Some of the major office buildings such as  Bank of China Tower, Landmark and AIA Tower even achieved a high occupancy level of 90% to 95%, as of end 2011.  Tenants in these buildings are broadly based from the government bodies and banking, IT, legal and insurance sectors.

For 2011 as a whole, office rental values grew by 16% y-o-y while office capital values grew strongly by 35.5% y-o-y.

'We expect to see new demand to continue to come from international retail brands and other services providers for the new gaming facilities.  At the same time, government departments will remain the key source of expansion and relocation demand.  Office rental is likely to remain on its growth track as newly incorporated companies are keen to lease quality office space in Macau.  Meanwhile, the Nam Van Lake Lot A6 project that is scheduled for completion in 2012 will add a total of 400,000 sq ft of new office stock to the leasing market, relieving a bit the pressure of tight vacancy,’ comments Gregory Ku, Jones Lang LaSalle’s Managing Director in Macau.
 
Investment

The investment market continued to be active in 2H11, following the several eye-catching deals recorded in 1H11.  To name some, a 2,000-sq ft retail property was sold for HKD 220 million to a local investor; AIA Tower was sold for HKD 1,260 million to a foreign investor; and The Manhattan South Tower was sold for HKD 600 million to a local investor.

'The total value of property transactions worth HKD40 million or above amounted to HKD4.9 billion in 2011.  The source of capital mainly came from Mainland China and local investors,’ adds Gregory Ku.

'Despite of the external economic uncertainties, Macau’s gaming and tourist sectors are expected to continue to perform well and remain the key drivers for local economic growth.  The new infrastructure projects will also help drive the momentum of the city’s economy.  Coupled with the low interest rates, which will likely to remain low for at least two yeas, investment demand is expected to remain active.  The appreciation of RMB will also help boost tourists’ consumption demand, which will benefit Macau’s retail sector and in turn strengthen the values of retail properties,’ concludes Gregory Ku.