Macau's property market reels from coronavirus as transactions fall to lowest levels since financial crisis

By Martin Choi martin.choi@scmp.com

/ https://www.scmp.com/business/article/3082868/macaus-property-market-reels-coronavirus-transactions-fall-lowest-levels?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp&utm_content=3082868 |

May 12, 2020 12:06 PM SGT

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Macau's property market has been dealt a heavy blow on all fronts by the coronavirus outbreak, and its recovery will need to rely on the city's beleaguered tourism and gaming industry, analysts said.

Residential property transactions in the first quarter of the year were at the lowest levels since 2009, according to data from Macau's Financial Services Bureau. Some 1,016 homes were sold in the first three months of 2020, a 22 per cent drop from 1,379 in the same period last year.

The average price of a home was 93,133 patacas (US$11,647) per square metre in March, a 7.5 per cent drop from 100,636 patacas in January as a result of the coronavirus outbreak, according to statistics from the Financial Services Bureau.

Commercial property transactions hit a record low of 50 in the first quarter, the lowest level since the return of Macau to Chinese rule in 1999. Previously, the lowest level was 80 recorded in the fourth quarter of 2008.

"The impact of the Covid-19 has hit all sectors of Macau's property market," said Philip Pang, a partner at Telok Real Estate Partners. The Hong Kong-based developer focuses on developing small flats for rent in Macau, and has also launched a co-living project in the city.

"Transaction volumes are very low, and we are starting to see a rise in distress situations as property owners are selling at really low prices to cash out."

There are very few non-local buyers of homes in Macau now, according to Thomas Lam, executive director at Knight Frank.

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"When China launched the individual visit scheme and investment immigration programmes for Hong Kong and Macau after the Sars outbreak, Macau's property market saw a huge surge in buyers from the mainland and Hong Kong," he said.

"But these days, mainland Chinese and Hongkongers would rather participate in investor immigration programmes elsewhere than buy property in Macau. Macau's property market is heavily reliant on the gambling industry now."

The deterioration of Macau's casino industry, the city's biggest employer, has had a big impact on buying demand in the city, Pang added.

"We will need the casino industry to [recover] and people's salaries to stabilise, and hope that the property market will slowly recover after purchasing power returns. The property market is very quiet right now," said Pang.

Macau casinos suffered their worst month ever as travel restrictions during the coronavirus pandemic left the world's biggest gambling hub struggling with few players and a heavy daily burn of cash.

Gross gaming revenue in April plummeted 97 per cent to 754 million patacas (US$95 million) from a year earlier, according to government statistics. That was the biggest drop on record, surpassing the 88 per cent plunge in February.

The situation for casino operators in Macau has continued to deteriorate even after they reopened their doors following a 15-day shutdown in February to control the spread of the virus. Much of mainland China and the rest of the world remained under lockdown, with borders closed and flights grounded.

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Tourist arrivals to Macau plunged 94 per cent in March to 212,311, according to the latest statistics from the Macau Government Tourism Office. In the first quarter the number of visitors to the city dropped 68.9 per to 3.2 million.

"Casinos were the most affected parties under the pandemic and lockdown period because their business revenue is highly reliant on tourism from China," said Franco Liu, managing director of Savills Macau.

Liu said the persistent losses in the sector would push up the unemployment rate, further crimping the property market.

In the first quarter of the year, the unemployment rate rose to 2.1 per cent, up 0.4 percentage points from the final quarter of 2019, according to government statistics.

"Property market sentiment will still [remain] weak in the next six months due to an increasing unemployment rate, salary cuts and the uncertainty of the pandemic situation around the world," said Liu.

As the spread of the virus comes under control in Macau, the city should slowly return to normal in May and gradually ease cross-border restrictions, said Franky Fung, Ricacorp Properties' chief sales director for Macau and Zhuhai.

This will benefit the gambling industry and other economic activity in the city, and help the property market in the second quarter, he added. He expects transaction volumes to double in the second quarter as the public regains confidence.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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