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News Release

Hong Kong and Macau

Jones Lang LaSalle: Macau’s Residential Market Shows Signs of Improvement in the First Half of 2009

Having experienced a tragic plunge in its property market in 2H08 due to the global credit crunch, Macau’s residential sector has shown signs of improvement since March. The capital values for both high-end and mass residential sectors returned to the positive regime and recorded growth in 1H09, according to Jones Lang LaSalle in its Macau Mid-Year Property Review today.

Macau’s GDP recorded negative growth for two consecutive quarters, falling by 7.6% y-o-y in 4Q08 and 12.9% y-o-y in 1Q09, respectively. The contraction in 1Q09 is the largest fall in the past ten years. Net exports of services, mainly gaming receipts and tourism spending, saw negative growth in 1Q09. However, Macau’s private consumption expenditure presents a different picture, recording a positive growth of 3.4% y-o-y in 1Q09, albeit at a slower pace when compared with the 9.4% y-o-y growth in 4Q08.

The global economic slowdown, including that in China, has negatively affected Macau’s gaming revenue. In 1H09, Macau’s total gaming revenue decreased by 13.4% y-o-y to only MOP 51.3 billion. Nevertheless, on an absolute level basis, the city’s gaming revenue still maintained a good level when compared with the pre-2008 levels.

Macau’s tourist sector was also negatively affected. Total visitor arrivals to Macau decreased by 11.4% to 10.3 million during 1H09. Its tourism receipts were recorded at MOP 3.46 billion in 1Q09, down 7.3% y-o-y.

Alongside the Cotai Strip, amidst the suspension of Las Vegas Sands’ projects, another brand-new entertainment complex ‘City of Dreams’ partially opened in June 2009. Developed by Melco Crown Entertainment Limited, this project is made up of different elements, including hotel rooms, serviced apartment units, a casino, a shopping arcade and a theatre. One of the hotels, part of the shopping arcade and the theatre are scheduled for completion by the end of this year.

Meanwhile, China decided to set aside a site of approximately 5 sq km at Hengqin to establish the Guangdong-Macau Cooperative Zone.  Out of which, about 1.1 sq km will be allocated for building a new campus for Macau University. Outside this zone, a 1,325-sqm site in the southeast of Hengqin was granted to Chimelong Group in December 2008 for 40 years, where a theme park will be built. The entire project will be completed in two phases in 2010 and 2012, respectively.

‘The new initiatives at Hengqin will help broaden Macau’s economic base and although detailed planning for the Guangdong-Macau Cooperative Zone is yet to be determined, the scheme will likely provide Macau with some alternative economic momentum in the long run. Looking at the short-term future, the rest of 2009 will likely see Macau’s economy remaining slow, and it will only see a chance of a turnaround when the global economy registers a more sustainable recovery,’ remarks Marcos Chan, Jones Lang LaSalle’s Head of Research, Greater Pearl River Delta.


The residential market in Macau, particularly the mass residential sector, has shown signs of improvement since 2Q09. The number of residential sales transactions rebounded from the trough of less than 200 in January to close to 800 in May.

In order to stimulate the residential market, the government announced two sets of incentive measures, including a 4% home loan interest rate subsidy scheme and a mortgage guarantee programme. These policies are set to relieve the burden of home buyers and help broaden the end-user demand for mass residential properties. 

 ‘The incentive measures have helped boost demand for mass residential properties lately, although the high-end market was less benefited. Coupled with the low interest rate environment and the recent rebound in the region’s stock markets, sales of residential properties bounced back to its pre-crisis levels,’ remarks Jeff Wong, Jones Lang LaSalle’s Head of Residential in Macau.
The recent months saw capital values of some newer or uncompleted projects such as Nova City, Le Royal Arc, One Central Residences and La Cite rebounding notably after falling drastically in the aftermath of the financial market crisis last year. According to the Jones Lang LaSalle High-end Residential Capital Value Index, capital values for high-end residential properties grew by an average of 2.2% in 1H09. For the mass and medium residential market, capital values rose dramatically by 12.1% during the same period.
With the suspension of Las Vegas Sands’ expansion projects on the Cotai Strip and the tightening of the import labour policies by the government, the number of expatriates in Macau contracted significantly since the fourth quarter of last year. The leasing market for high-end properties remained largely subdued as the number of expatriates continued to fall and housing budgets were reduced. While the high-end market was seriously affected, landlords in the medium market were benefited as tenants traded down to accommodate their tighter housing budgets. Rents were generally on the fall but at a slower pace compared with 4Q08. High-end residential rents declined by 12.6% in 1H09, while rents for mass residential properties edged down by 3% during the same period.
‘Although the Macau economy will continue to stay slow until the global economy truly recovers, the low interest rate environment and the interest rate subsidy scheme will help offset some of the negative impacts of the economic uncertainties. Residential demand and prices will be able to remain stable for the rest of 2009,’ adds Wong.
The office market was negatively affected by the global economic slowdown as vacancy rates increased and rentals fell. There were instances where companies scaled back their operations in Macau or, in some extreme cases, withdrew their presence from the market. In general, companies held back their expansion plans with most small to medium enterprises becoming increasingly cost sensitive. As such, the overall office vacancy rate trended up further to 26% as of end-1H09. Grade A office space was less affected and the vacant space was mainly concentrated in the NAPE area.
The number of office sales transactions reduced by 67% y-o-y for the first five months of 2009 as credit tightened and investment demand softened. Investors became very cautious and the market saw almost no demand from institutional investors during the first six months. Capital values for offices declined by an average of 7.9% in 1H09.
Office rents fell by 6.4% in 1H09.
‘Notwithstanding the slowing business environment, Grade A office properties will remain an attractive class to institutional investors, providing a reasonable return of about 6.5%. If Macau’s long-term strategy is to broaden its economic base, office demand will be strengthened progressively,’ comments Gregory Ku, Jones Lang LaSalle’s Managing Director in Macau.