Underpinned by sustained property demand amid the strong economic growth, the Macau property market continued to grow in 2006.  Both the office and residential markets registered growth in capital values and rentals, while the retail property sector is taking shape to a more sophisticated landscape, says Jones Lang LaSalle at its Macau Annual Property Review for 2006 today.

During 2006, Macau’s GDP expanded by 15%, after a 6.7% growth in 2005.  Fixed asset investment and exports of services were the key drivers, which grew by 46.5% and 13.8% respectively.  With a more promising labour market and higher income levels, particularly those engaged in the gaming industry and for the young generation, private consumption expenditure increased by 7.6% in 2006.

Macau’s tourism industry continued to prosper with an increasing number of visitor arrivals, underpinned by new tourism offerings like Wynn Macau, Galaxy StarWorld Hotel and Grand Lisboa.  Visitor arrivals registered a 17.6% growth in 2006 to 21.99 million, with Chinese visitors accounting 54.5% of the total.  For 2006, tourism receipts recorded a 22% growth to US$ 2.7 billions.

Macau’s gaming revenue reached US$ 6.95 billion, surpassing that of Las Vegas Strip over the same period. Consumption and property buying confidence in Macau strengthened, on the back of a more positive labour market outlook.  The unemployment rate trended down further to 3.5% in December 2006 from 4.1% at the beginning of the year, with over 30,000 people being employed by the gaming industry.

In 2007, 2,200 hotel rooms, 4,600 gaming tables and 1 million sqft of MICE (Meetings, Incentives, Conventions and Exhibitions) space are due for opening.  ‘A new economy is emerging in Macau.  The tourism market will start seeing more long-haul business/leisure visitors.  The labour market will continue to prosper while income will grow further.  Domestic consumption and non-resident spending will both remain on the rise,’ said Mr Marcos Chan, Associate Director of Research, Jones Lang LaSalle.

Investment Market
Macau continues to be the hot spot for investment, attracting investors from all over the world.  A number of major projects, dispersed over Taipa, Macau Peninsula, Coloane and Cotai Strip, were announced in 2006.  These projects will bring to the territory about 20,000 hotel rooms, 17,000 residential units and 1350 serviced apartments in the next 3 years.

In 2006, a total of 12 transactions worth over US$ 5 million were recorded.  Foreign funds were more active in 2006 and contributed 74% of the total transaction value for the whole year.  Hong Kong investors and local investors contributed 21% and 5% respectively.

Residential Market
Residential transaction volume declined a little bit due to the high base in 2005 and the more cautious market sentiment after years of run-up in property prices.  A total of 16,822 residential transactions were recorded in 2006.  In comparison, mass residential properties offered at around MOP1 million were more popular than high-end residential properties as they are relatively more affordable to young buyers while at the same time better fit the appetite of investment immigrants.  Foreign funds remain optimistic about Macau’s residential market, as evidenced by One Central Macau’s high transaction prices that exceed HK$ 4500 per sq. ft.

New completions are expected to rebound in 2007-08 as constructions of
several new projects have commenced since the last two years. However, as new supply has been falling in the last few years, leading to an accumulated level of pent-up demand while institutional investors and overseas funds continue to be active in seeking investment opportunities, the new supply is not expected to exert too much pressure on the market.

There has been increasing number of foreign funds and Hong Kong developers entering the market.  Residential properties in Macau will see a facelift in all aspects like building design, building quality and after-sale management services, and will therefore likely become the focus among investors.  With more world-class tourist facilities completed in future, the number of expatriates in Macau will likely increase, creating new end-user demand for high-end residential properties.

‘Demand for residential properties, from locals and expatriates alike, will continue to grow with higher incomes and enhancing job prospects.  The prosperous economic outlook will continue to catch attention of the institutional investors, putting heavier demand pressure on investment-grade properties.  It is possible to see a wider price divergence between old and new properties in future,’ added Mr Chan.

Macau’s retail market has been fast evolving, with the opening of the world-class tourism offerings like Wynn Macau and Macau Fisherman’s Wharf.  The opening of these shopping arcades has introduced many luxurious international brands to the territory, marking the trend towards a more top-end consumption pattern.  The completion of The Venetian Macao in 2007 is expected to trigger another round of retail market landscape transformation, with the offering of various mega malls such as Grand Canal Shoppes and Mega Galaxy Resort which have been never seen before in Macau.

For traditional street shops, some of the local retailers relocated from the core locations to the second- and third-tier retail spots as they started to feel the pressure of higher rents.  The retail space in the core locations was increasingly being filled by Hong Kong and foreign retailers with higher affordability.

Top-end luxurious brands prefer prime shopping malls like Wynn Esplanade.  Foreign retailers hold a cautiously optimistic view about Macau’s retail market and tend to adopt a more conservative expansion plan in the territory before they see more of the tourism schemes are due for completion.  Rentals of traditional street shops edged up 1.2% while capital values up 1.4% during 2006.

Mr Gregory Ku, Managing Director at Jones Lang LaSalle, Macau, remarked, ‘The opening of world-class resorts and the MICE venues will start bringing in both long- and short-haul leisure and business travellers.  The new mega malls will ensure further broadening and deepening of Macau’s retail market.  The concept of luxury retailing will continue to consolidate.’

‘New shopping experience coupled with higher incomes set to encourage local consumption, while a wider range of tourists will boost tourism spending.  However, competition for tenants will remain strong given the large amount of upcoming supply.  Prime street shop rents will remain stable,’ added Mr Ku.

Source | Jones Lang LaSalle Macau

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