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News Release

Hong Kong and Macau

JLL: Macau property market in the throes of economic transformation


HONG KONG AND MACAU, 20 January 2016 – In 2015, Macau’s property market slowed down with all the property sectors experiencing negative growth amid the 19 consecutive months of decline in gaming revenue and the outflow of hot money, according to JLL in its Macau Year-end Property Review today.

Impacted by the Central Government’s anti-graft campaigns and crackdown on rampant abuse of China Union Pay card payment system, Macau’s gaming revenue tumbled down to a new monthly low in 2H15, which is equal to the level back in mid-2010.  According to the DICJ figures, Macau’s total gaming revenue declined by 34.3% y-o-y to MOP 231.8 billion for 2015 as a whole, of which the VIP market dropped by 39.9% y-o-y.  In fact, the proportion of the VIP market versus the overall gaming sector contracted to 55.1% in 2015, which is the lowest in the recent decade.  The impact on the mass market was relatively minor but it still recorded a negative growth of 25.8% in 2015. 

For the first three quarters of 2015, Macau’s overall GDP recorded at MOP 235.3 billion, representing a negative growth of 25.0% y-o-y. As several massive entertainment projects and public construction works were ongoing, Macau’s fixed capital formation and private consumption expenditure grew by 9.9% y-o-y to MOP 55.1 billion and by 2.8% y-o-y to MOP 62.5 billion respectively.

Macau’s visitor arrivals totalled 28.1 million for the first 11 months in 2015, down by 3.1% y-o-y. Despite the cut in the length of stay for mainlanders on their transit visas, visitors from Mainland China still made up the largest proportion, accounting for 66.8% of the total visitor arrivals. Travellers under the Individual Traveller Scheme (ITS) accounted for 46.8% of the total number of visitors from mainland China. While hotel room stock reached a new high of 31,700, hotel occupancy rate declined to 80.2%. The cumulative average length of stay of guests edged up by 0.1 day to 1.5 days in November 2015.

The labour market was broadly stable in 2015. According to the DSEC statistics, unemployment rate edged up by 0.2% to 1.9% in November while the overall median monthly income rose by 15.4% y-o-y to MOP 15,000 as of the end of 3Q15. Residential deposit declined by 3.4% y-o-y to MOP 457.7 billion as of November. The total number of imported workers in Macau reached a new high of 182,246 as of end November, equivalent to an increase of 7.0% or 11,900 comparing to end 2014. The number of imported workers is expected to continue to grow, albeit at a slower pace, in 2016 as many entertainment projects are due for completion in 2H16. 

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​“In view of the negative growth recorded in most of its economic indic​ators, the outlook for Macau’s pr​operty market is expected to​ be uncertain in the short term and may face downside pressure in 2016, though several lar​ge-scale projects are sche​duled for ​opening ​in 2H16,” said Jeff Wong, Head of Residential at JLL Macau.

The transaction volume of Macau’s residential market reached a record-low in 2015.  According to the DSEC statistics, a total of 5,431 residential transactions were registered in the first 11 months of 2015, down dramatically by 24.2% y-o-y. This was mainly attributable to the special stamp duty (SSD) and the limited number of new projects launched during the year.  

The capital values for the high-end and mass-to-medium residential sectors declined by 22.1% y-o-y and 15.7% y-o-y in 2015 respectively, while their investment yields contracted to 1.7% and 1.8% in 2H15 respectively. 

A slower growth was seen in the number of blue card renewals in 2015, especially those for the senior expatriate executives. Coupled with an increasing number of VIP junkets moving out from the luxury housing market, the high-end residential rental values plummeted by 30.3% y-o-y in 2015.  For the mass-to-medium residential segment, the rental values fell by 18.8% y-o-y in 2015, with the new supply brought by the completion of projects that were sold previously on pre-sale basis.

According to the DSEC statistics, the number of new residential completions totalled 3,321 units as of November 2015, bringing new supply to the leasing market. Notable projects included One Oasis, Paragon and Nova Park.  During the year, new supply in the sales market was dominated by the remaining stock of residential projects that had been launched for pre-sale previously. A total of about 2,671 residential units are estimated to be completed in 2016, of which approximately 65% have been sold by means of pre-sale. From 2016 to 2020, the total number of new residential completions is estimated to be about 16,287 units. However, residential supply is expected to be very limited in the longer term due to the land resumption issue.

“In view of the economic uncertainty, we believe that the residential sales market will face some downside pressure in 2016 though several new gaming facilities are scheduled for completion in the year. In general, investors are expected to remain cautious and adopt a wait-and-see attitude,” remarked Jeff Wong.  “However, the government statistics showed that the numbers of marriage and birth registration have been increasing in the recent decade following the implementation of the open-door immigration policy in Macau from 1989 to1996. We expect it will provide solid support to the residential market in the long term.”

Macau’s retail sector was badly hit due to the slowdown in the gaming and tourist sectors in 2015. According to the DSEC statistics, the total retail sales fell by 10.4% y-o-y to MOP45.3 billion for the first three quarters. Luxury goods saw the biggest drop - the retail sales of leather goods and watch and jewellery declined by 23.6% y-o-y and 26.1% y-o-y respectively. Nevertheless, the retail sales of cosmetics grew by 21.3% y-o-y during the same period. 

Most of the retailers in Macau slowed down their pace of expansion. Stronger retailers, especially those selling Korean cosmetics, sports merchandise as well as fast fashion brands, were keen to take up high street shop spaces. However, they were no longer willing to bid up on rentals and became more cautious. In fact, the asking rentals of high street shops declined by approximately 15% in 2H15, due to the tenants’ strong bargaining power. During 2H15, a notable leasing transaction was recorded - an international watch group took up a shop space located near St. Paul’s Ruin at a monthly rental of about HK$1,450,000.  For 2015 as a whole, the overall retail rental fell by 14.9% y-o-y. 

In the sales market, the retail property prices saw a plunge as vacancy rates in the core shopping areas were on the rise. The most significant retail sales transaction recorded during the year was the acquisition of a retail space in S. Domingos area by a local tycoon for HK$315 million in 2H15.  According to the JLL Macau Retail Index, the overall retail capital values fell by 16.0% y-o-y in 2015.

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​“There will be more new supply of retail space coming on stream.  With several new mega projects such as Wynn Palace, Parisian and MGM Cotai scheduled for completion in 2H16, the rentals of street shops may possibly fac​e ​downward pressure in 2016,” commented Oliver Tong, Associate Director, Retail at JLL Macau.

Macau’s office sector was broadly stable in 1H15 but a dramatic decline was seen in 2H15. For the first 11 months of 2015, the total number of new incorporations registered in Macau was only 4,667, down 6.8% y-o-y. Most of the newly registered companies were from the wholesale and retail, financial and construction sectors, which made up a total of approximately 79.3%.

Demand from offshore, gaming-related and China-based investment companies shrank significantly and led to a negative growth in the overall office leasing market in 2015.  The rental values for the overall office market and Grade A office sector fell by 13.9% y-o-y and 5.9% y-o-y respectively in 2015, as indicated by the JLL Macau Office Index.

In the sales market, the capital values for the overall office market and Grade A office sector fell by 20.7% y-o-y and 16.6% y-o-y respectively in 2015. Office supply remained highly limited, with the overall office vacancy rate recorded at a low level of about 6% at the end of 2015. The investment yields for the Grade A office sector and overall office market grew to 2.5% and 2.6% respectively in 2015.

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“With the scheduled completion of several new massive entertainment projects in 2H16, we expect to see some of the related companies m​oving out from their existing premises and relocating to the newly completed developments. The office vacancy rate may rise, leading to a further drop in office rental values in 2016.  The office sales market is also expected to experience a downturn, with capital values falling by 10-15%,” said Gregory Ku, Managing Director at JLL Macau

Forecast in 2016:
 ​​​Capital ValueRental Value
Residential high-end▼ 0% to 10%▼ 0% to 10%
Residential mass-to-medium▼ 0% to 5%▼ 0% to 5%
Office▼ 10% to 15%▼10% to 15%
Retail▼10% to 15%▼10% to 20%