Macau ResidentialAsian Cities Report – 1H 2020

REPORT

Savills Research

savills.com.mo/research

Macau Residential

A tourist and gaming-based economy hard hit by COVID-19

ECONOMIC IMPACT OF COVID-19In Macau the fi rst case of COVID-19 was reported on 22nd January (a visitor from Wuhan) and the Government quickly announced and implemented a series of measures to prevent further community spread. Measures included closing all casinos for 15 days in February. From 19th March, all visitors from overseas (except mainland China, Hong Kong and Taiwan) have to be quarantined for 14 days and the measure was subsequently tightened further to include more regions afterwards. The strict series of measures eff ectively contained the virus compared to neighboring cities, but at the same time resulted in extremely low visitor numbers and dealt a severe blow to gaming revenue.

According to a press release from the Gaming Inspection and Coordination Bureau (DICJ), April gaming revenue stood at MOP754 million, compared with MOP23,588 million in April of the previous year, indicating a huge 96.8% drop. Gaming industry employees currently account for about 20% of the local workforce and taking closely related industries into account such as accommodation, food and beverage, etc., that proportion increases to over 50%, according to statistics from DSEC (Direcção dos Serviços de Estatística e Censos). In other words, the gaming industry is closely bound with the economy of Macau. Therefore, given the seriousness of the economic crisis, the Macau Government has implemented several measures to support the local economy and help both enterprises and residents by granting extra funding and business loans to enterprises and extra cash incentives to residents. Over MOP10 billion was allocated to the support schemes, trying to minimize the impact of the pandemic on the economy, and maintain employment levels.

THE RESIDENTIAL MARKETMeanwhile in the residential market, 154 transactions were recorded in the fi rst half of April, a sharp 60.3% drop compared to the same period in 2019. The average transaction unit price fell by 9.3% compared to the same period last year, at MOP98,414 per sq ft in the fi rst half of April. However, there were also several residential projects launched in the same month, and local news pointed out that the market reaction to the sales was not as bad as predicted, with long queues and plenty of interest. However, we need to wait until the offi cial records are released to know the number of deals actually concluded. Looking ahead, future aff ordability will depend on the progress of the pandemic which at the time of writing remains extremely uncertain. Some jurisdictions, however, are reporting that the virus is under control including near neighbours China, Hong Kong and Taiwan which would seem to augur well for the second half of the year if further outbreaks are successfully contained.

GRAPH 1: Gaming Revenue Of Macau, Q1/2010 to Q1/2020

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Source DSEC, Savills Macau

STAGE NO. OF PROJECTS NO. OF UNITS CAR PARKS MOTORBIKE PARKS

Design Stage 120 8,922 5,979 2,266

Under Construction 57 3,652 2,137 644

Completed (under inspection) 15 608 444 91

Granted License to use 7 1,065 363 197

Total 199 14,247 8,923 3,198

TABLE 1: Number Of Residentia Projects At Diff erent Construction Stages

Source Savills Macau

GRAPH 2: Number Of Visitor Arrivals, Q1/2008 to Q1/2020

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20082009 2010 2011 2012 2013 2014 2015 2016 2017 2018 201920

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Source DSEC, Savills Macau

Macau Residential

NEW HOUSING POLICYAnother long-term trend related to the residential market worth paying attention to, is the new housing strategy from the fi rst policy address from the Chief Executive of Macau SAR on 20th April, after he took the offi ce on 20th December 2019. The new housing strategy divides the local residential market into fi ve tiers, rather than three tiers previously, which include social housing, economic housing, sandwich class housing, elderly housing and private housing. Social housing is designed for those with below average incomes, off ering a below market rent to provide them with shelter. For economic housing, the income level is set much higher, and the upper limit is set above the average income but is aimed at those who cannot aff ord to purchase housing without diffi culty, according to the Government’s defi nition, and provides housing at below market prices for the targeted group. Sandwich class and elderly housing are two new concepts released from the latest policy address. A good example of sandwich class housing comes from Hong Kong. Housing policies targeting a ‘sandwich class’ in Hong Kong started since 1990, designed for those who exceeded the income limit for applying for social housing, yet could not aff ord to purchase private housing. It is believed the defi nition would also be the same in Macau, but the details are open for discussion at a later date, according to an announcement from Government. For elderly housing the minimum age limit will probably be set at 65 years old. And the last tier is private housing, representing the largest share of the market.

The impact of Government funded housing is a serious concern for developers,

The new housing strategy divides the residential market into fi ve tiers, rather than

three tiers previously.

GRAPH 3: Residential Transactions, Q1/2010 to Q1/2020

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Source DSEC, Savills Macau

private home owners and investors, but the Government has not yet released many details of the two new housing policies. It is believed that only by arranging a reasonable time schedule for the new launches of funded housing, that a balance between funded housing and private housing can be found, otherwise insuffi cient supply or oversupply, either in the funded housing market or the private housing market would cause much higher levels of price volatility in the residential market.

LAND SUPPLYAccording to the latest report from DSSOPT (the Land, Public Works and Transport Bureau of Macao), there are only 57 residential projects totaling 3,652 units under construction, while 120 residential projects totaling 8,922 units of potential supply are at the design stage. According to research carried out by Savills Macau these projects account for almost all existing short-term potential supply. One of the reasons for this is that from 2014 to 2019 over 70 sites were revoked by the Macau Government, representing an area of over 270,000 sq m, due to the implementation of a new land law. Most of the cases are still under litigation and the Government has no time table for the release of the sites to the public market, and this is likely to cause a lack of land supply in the short term.

GRAPH 4: Area Of Residential Started and Completed, 2010 to Q1/2020

Source DSEC, Savills Macau

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Area of residential completed Area of residential started

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