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News Release

A Slower Property Market in Macau in 2H08 Amidst Global Credit Crunch

Hong kong and macau, 14 January 2009 – Having experienced a steady growth in 1H08, Macau’s property market entered a down cycle in 2H08, especially towards the end of the year.  The downward trend of the property market is mainly attributable to the slowdown in economic growth momentum triggered by the US credit crunch and the various restrictive tourism policy measures launched earlier in the year, reports Jones Lang LaSalle in its Macau Annual Property Review.

During the first three quarters, Macau’s economy performed strongly with a growth of 21.6%. The gaming industry remained the key driver for the economy, with the total export of services surging by 36.2% y-o-y. Non-resident gaming revenues grew by 45.4% y-o-y, while non-resident accommodation expenditures grew by 47% y-o-y. For the domestic side, Macau’s private consumption expenditure grew by 17.2% y-o-y with the rising domestic incomes and local interest rate cuts. However, gross fixed capital formation fell by 17.6% y-o-y, the first negative growth being recorded since 2001.

Despite the tightening of its Individual Traveller Scheme by Guangdong Provincial Government earlier in 2008, total visitor arrivals in Macau for the first 11 months of 2008 was still high at 27.6 million, up 13.4% y-o-y. It also surpassed the 26.7 million in Hong Kong during the same period. However, Macau’s inbound tourism slowed down in 4Q08 with the outbreak of the global financial crisis towards end-3Q08.

Although Macau’s gaming revenue growth experienced a marked slowdown in 2H08, it still grew by 31% to a record high of MOP 109.5 billion for 2008 as a whole, with the strong growth in the first three quarters. The daily revenue per gaming table also picked up to USD 8,497 at end-2008 from USD 6,112 at end-2007, with the number of gaming tables maintaining at a steady level during 2008.


The residential market was robust in 1H08, with the number of registered Sales and Purchase Agreements averaging at 1,440 per month. However, it declined to an average of 580 in 2H08 and fell to 308 in November, the lowest since 2003.

The collapse of the global financial markets ended the up-cycles of the stock market and the property market. With the wealth effect generated from these two markets being eliminated and the potential salary cuts in 2009, people tended to be more cautious and hesitant to enter the market.

In view of the global credit crunch and falling property prices, local banks tightened the lending of mortgage loans. Mortgage rates for new loans rose to 3.75% at year-end from about 2.75% in the middle of the year. The spreads between best lending rates and mortgage rates were narrowed.

While the Macau government’s announcement in 2Q08 to cap Macau’s gaming licenses and gaming tables and the tightening of the Individual Travellers Scheme by the Guangdong provincial government did not have a direct impact on the residential market, these raised the concerns over Macau’s long-term economic growth prospects and weakened the market sentiment and transaction volume since then.

On the supply side, a total of 2,389 units were launched in 2008, while about 1,230 of them were sold. These new units mainly came from The Residencia Macau, Nova City and Millennium Court. For 2009, 75% of the 4,121 units scheduled for completion have been pre-sold.

Notable investment sales transactions in 2008 included the sale of 372 units and 372 parking spaces at Lot KL to Carlyle Group for HKD 1.8 billion and the sale of a site at Estrada de Cacilhas for HKD 300 million.

The average capital value for high-end residential properties fell by 21.6% in 4Q08 and by 21.4% for 2008 as a whole. For the mass and medium residential market, it dropped by 26.2% in 2008.

Las Vegas Sands’ suspension of its projects and lay-offs of expatriates, the implementation of the new imported labour policy together with casino operators’ restructuring of their headcounts will further trim down the number of expatriates in 2009. According to market information, many expatriates terminated their tenancies during 4Q08 while existing tenants requested for rental reduction, exerting downward pressure on rents.

Rental value for high-end residential properties declined by 22.9% in 4Q08 and dropped by 15.4% for the year. For the mass and medium market, it fell by 17.4% in 2008.

‘Although affordability remains healthy and interest rates stay at low levels, the negative impact stemming from rising unemployment rate and salary cuts may cast a shadow over the market. Buyers will become more cautious and take a wait-and-see attitude. The tight credit environment is expected to extend into 2009, which will further dampen investment and end-user demand. The shrinking expatriate community in Macau due to new government policy and casinos’ headcount cuts together with corporations’ tightening housing budgets are expected to weaken leasing demand for luxury residential properties,’ says Jeff Wong, Head of Macau Residential at Jones Lang LaSalle.


Retail sales grew strongly by 39% to close to MOP 14 billion in the first three quarters of 2008. However, it is important to note the downward growth trend, which was reduced from 46.4% in 1Q08 to 31.4% y-o-y in 3Q08, reflecting that the growth momentum had already slowed down before the outbreak of the global financial crisis.

Although the statistics for 4Q08 is not yet available, it is not surprising to see a more notable slowdown in growth due to the more cautious spending environment, weaker local consumer confidence and declining visitor arrivals.

During 2008, there were four new retail developments entering the market, bringing a total of 471,000 sq ft (gross) of new retail supply. These included Wynn Esplanade, The Shoppes at Four Seasons, New Yaohan and Cerejeira.

Both capital and rental values for high street shops recorded growth in the first three quarters, although at a falling momentum. However, with the collapse of the global financial market in 4Q08, capital value and rental value for high street shops dropped by 11.8% and 4.6%, respectively. For 2008 as a whole, capital value for high street shops fell by 1.6%, while rental value still enjoyed a 5.8% growth.

‘Clouded by global economic uncertainties, job insecurity and the elimination of the wealth effect, consumer sentiment is set to be weakened and put downward pressure on private consumption expenditure. With the slowdown of its inbound tourism, the number of visitor arrivals to Macau is expected to contract, which will probably pull down the city’s tourist consumption expenditure. Macau’s retail sales is likely to decline in 2009,’ comments Marcos Chan, Jones Lang LaSalle’s Head of Research, Greater Pearl River Delta.

‘Rental for high street shops is expected to fall in 2009, as some retailers may hold back their expansion plans or scale down their operations. With the suspension of some key projects that leads to fewer new supply, it may lend some support to retail properties’ rentals,’ adds Chan.


With the outbreak of the global financial crisis, many banking and finance sector companies have run into difficulties. Fortunately, banking and finance sector tenants only make up a relatively small portion of Macau’s office population at only 10%. Macau was less affected and so far has not seen much space returning into the market. However, office demand has softened as new and expansion demand is limited.

The office market was more active in 1H08 on the back of stronger demand, with major Grade A office buildings showing improvement in their occupancy levels. However, with the new supply from FIT Centre, overall vacancy rose to 23% by end-2008 from 20% at the beginning of 2008.

Office demand focused on space at AIA Tower and FIT Centre. In AIA Tower, The Executive Centre took up 18,000 sq ft (gross), while VIVA Macau Airline took up 18,000 sq ft (gross). In FIT Centre, Bank SinoPac leased 12,000 sq ft (gross), while Bally leased 9,000 sq ft (gross). Other notable transactions included IGT’s expansion from Tong Nam Ah Commercial Building to China Civil Plaza (8,000–9,000 sq ft).

The capital value and rental value for offices declined by 16.9% and 4.2%, respectively, in 4Q08, after their growth in the first three quarters. For 2008 as a whole, capital value and rental value for offices reduced by 2.6% and 1.1%, respectively.

‘The global financial tsunami is expected to continue to affect Macau’s economy in 2009. Office demand will remain soft. We may see some companies contract their operations and scale back headcounts for cost control, leading to a rise in vacancy rates. Rents will likely to fall with weaker demand and rising vacancy,’ says Gregory Ku, Jones Lang LaSalle’s Managing Director, Macau.

‘Grade A offices or those of higher quality will be more resilient and are expected to continue to outperform the second-tier buildings. In fact, Grade A office properties in Macau have been and will remain an attractive asset class to institutional investors. From the broader economic sense, if Macau can broaden its economic base by opening up more drivers, its economy will become more solid and office demand can be strengthened progressively in the long term.  The various infrastructure projects on agenda and the proposed development scheme at Hengqin is set to provide Macau with some additional long-term economic spins on top of its maturing gaming and tourist industries,’ concludes Ku.