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HONG KONG AND MACAU, 20 July 2011 – Macau’s GDP expanded strongly in 1Q11, continued to be supported by the robust tourist and gaming sectors. Local demand for residential properties, both high-end and mass alike, was strong during 1H11, leading to a double-digit growth in capital values for both market segments, according to Jones Lang LaSalle in its Macau Mid-Year Property Review today.Macau’s GDP rose strongly by 21.4% y-o-y in 1Q11, with gaming revenue and tourist spending remained as the key growth drivers. The double-digit growth of 12.6% y-o-y for the private consumption expenditure and the rising individual income were also major attributes to the city’s economic growth, suggesting that domestic demand was as strong as that from tourists during the period. In May, Macau’s unemployment rate further declined to 2.6% from 2.8% in end 2010 while in 1Q11, the city’s medium income further increased to HKD9,600 from HKD9,000 in end 2010.For 1H11, Macau’s gaming revenue reached a record high of over MOP 124 billion (USD15.5 billion), representing a y-o-y growth of 44.6%. It is worth noted that Macau’s gaming revenue (USD12.9 billion) was more than five times of that of Las Vegas (USD 2.5 billion) for the first five months of 2011. Macau’s total visitor arrivals for the first five months of 2011 was recorded at 11.1 million, up 7.2% y-o-y. The majority of visitors continued to be from Mainland China (57%) and Hong Kong (28%).The number of imported workers continued to increase to 84,000 as of end-May 2011, up 11% from end 2010. Looking ahead, with the ground-breaking of the LRT and the Hong Kong-Zhuhai-Macau Bridge in 2H11, the number of imported workers in Macau will likely to grow further. ‘As Macau’s property market has become more and more local demand driven, we expect it to continue to prosper in spite of the increasing uncertainties externally. Macau’s economy is likely to remain strong backed by the robust gaming and tourist sectors, while its employment environment will continue to be promising, underpinned by the ongoing infrastructure and construction projects as well as the opening of new gaming facilities,’ remarks Marcos Chan, Jones Lang LaSalle’s Head of Research, Greater Pearl River Delta.ResidentialThe residential market was extremely active in 1H11 before the government’s imposition of the Special Stamp Duty (SSD) in mid-June. Despite the slowdown in the transaction volume immediately after the implementation of the new policy, the overall residential market performed very well in 1H11. Both the primary and secondary segments recorded a growth in their numbers of Sale and Purchase Agreement. From January to May 2011, a total of 10,441 Sale and Purchase Agreements were recorded. Out of which, 14% was originated from the primary segment while 86% was from the secondary segment.In 1H11, several new projects were launched and were well received by the market. For example, Green Island, comprising a total of 450 units, had achieved a sold-out in April since its first launch in February, fetching a total value of HKD2 billion; at Soho Residence, a standalone residential tower, all of its 126 units were also sold out in less than one month, fetching a total value of HKD350 million. It is worth noted that some of the units at Soho Residence were sold at about HKD 5,200 per sq ft, a record unit price within the district. The majority of buyers were local investors and end-users, while transactions by overseas funds were also recorded.
The capital values for the high-end residential market rose by 15.2% q-o-q in 1Q11 while remained stable in 2Q11 with the implementation of SSD. For 1H11 as a whole, high-end residential capital values increased by 15.2%, compared with end 2010. For the mass and medium residential market, capital values recorded a growth of 10.6% compared with end 2010.On the leasing side, with the strong expatriate demand led by the opening of new gaming facilities, the average rental value of high-end residential properties rose by 9.5% q-o-q in 1Q11 and 1% in 2Q11. For 1H11 as a whole, the average rental value of high-end residential properties registered a 11.9% growth, compared with end 2010. For the mass and medium market, the average rental value rose by 12.2%, compared with end 2010.A total of 2,486 units are scheduled for completion in 2011, while 2,300 units out of which have been already sold. Notable projects that were launched for pre-sale in 1H11 included Green Island (450 units), SOHO Residences (126 units) and One Oasis South Residence (700 units). For the new supply of 1,374 and 1,486 units respectively in 2012 and 2013, almost all of those scheduled for 2012 and more than half of those scheduled for 2013 have been sold.‘Despite of the imposition of SSD, residential properties have been and will continue to be one of the most preferred investment vehicles among the Macau people, while owner-occupiers and long-term investors will continue to be the major source of demand. On the back of the limited supply in the upcoming months, home prices are expected to continue to hold firm in 2H11,’ says Jeff Wong, Jones Lang LaSalle’s Head of Residential in Macau.‘On the leasing side, we expect that expatriate demand will remain strong and continue to be the key driver for the sector. To alleviate the shortage of high-end residential properties, we believe that the government can speed up the approval process for developments at the high-end residential sites such as the Nam Van Lake Zone C and D project. We expect rentals for high-end and mass residential properties to rose by 10% in 2H11,’ adds Jeff Wong.
OfficeWith an increasing number of companies entering Macau, on the back of Macau’s improved business environment and the proposed infrastructure projects, a more active office leasing market was seen in 1H11. The expansion activities by the government and the private companies also helped boost office demand. In 1H11, the office vacancy rate went down to 20% from 24% in 2010, while office rents rose by 7.9% from end 2010, following the growth of 1.8% y-o-y in 2010.The occupancy levels in the major office buildings in Macau either improved or maintained at a high level in 1H11. All major Grade A office buildings such as Bank of China Tower, FIT Centre and AIA Tower experienced a strong take-up in 1H11. Tenants in these buildings are broadly based from the banking, accounting, IT, gaming as well as the public sectors.With the growth in office rental values, office properties became another good option for long-term investment. Following the positive growth of 14.7% in 2010, office capital values grew further by 15% in 1H11.‘For 2H11, we expect that Macau’s office market will be able to maintain its healthy growth track with the increasing number of companies entering Macau, on the back of the opening of new gaming facilities and the office demand from the associated service providers. The government departments will be another major source of demand as they continue to look for office space for expansion and relocation. We expect that both office prices and rentals will remain stable or experience a mild growth in 2H11,’ comments Gregory Ku, Jones Lang LaSalle’s Managing Director in Macau.
InvestmentThe growth momentum of the investment market in 2010 has extended to 2011. The total value for property transactions worth HKD40 million or above amounted to HKD2.7 billion in 1H11, while it was recorded at HKD6 billion in 2010. Several eye-catching investment deals were recorded in 1H11, including the en-bloc sale of Tower 6 of Nova City for HKD560 million and the en-bloc sale of Macau 39 for HKD950 million. The properties were purchased by either local investors or Mainland China investors.‘The investors showed keen interest for development sites, properties available en-bloc and prime high street shops. According to our firm’s survey on global capital flow, Macau’s total amount of capital flow recorded in 1H11 was HKD2.7 billion,’ adds Gregory Ku.‘Looking ahead, as Macau’s economic fundamentals remain strong, RMB appreciation continues to stimulate Mainlanders’ spending on retail and properties in the city, and the new infrastructure and construction projects continue to drive Macau’s economic growth momentum, we expect that Macau’s investment market will remain active in 2H11,’ concludes Gregory Ku.
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