• Macau’s property market remains under pressure in 2H22, due to the pandemic and interest rate hikes

    26 August 2022

    (24 August 2022, Macau and Hong Kong) Macau has been gradually back to normal with the new wave of COVID-19 pandemic that emerged in the middle of the year being brought under control. However, in the absence of favourable factors like border reopening, coupled with the potential interest rate hikes, Macau’s property market will continue to be under pressure, according to JLL in its 2022 Macau Mid-year Property Review and forecast.

    According to the DICJ statistics, Macau’s gaming revenue recorded at MOP 26.27 billion in 1H2022, down 46.4% y-o-y.  The gaming market ceased growth due to the pandemic and the issues with the VIP market.  The revenue of the VIP market plunged by 61.3% y-o-y to MOP 6.83 billion in 1H2022, accounting for only 26.0% of the city’s total gaming revenue.

    Macau’s GDP totalled MOP 54.27 billion in the first quarter of 2022, down 8.9% y-o-y.  According to the statistics of the expenditure-based GDP, private consumption expenditure and government final consumption expenditure reduced by 2.7% and 2.0% y-o-y respectively.  However, trade in goods boomed, with imports and exports of goods rising by 29.0% and 56.8% y-o-y respectively.  The overall net exports fell by 35.4% y-o-y due to the contraction in exports of services. The fixed capital formation grew by 3.2% y-o-y, mainly driven by the increase in government investment.

    According to the DSEC statistics, Macau’s total visitor arrivals totalled approx. 3,465,000 in 1H2022, down 11.8% y-o-y.  Visitors from Mainland China made up 90.3% of Macau’s total visit arrivals, while the number of visitors visited Macau under the Individual Traveller Scheme (ITS) accounted for about 28.3%.  As of mid-2022, the total supply of hotel rooms in Macau recorded at 36,369, down 1,312 rooms or 3.5% from end 2021. The cumulative occupancy rate of hotel rooms in Macau fell to 37.5%, while the average length of stay of guests maintained at about 1.8 nights.

    Ongoing outflow of expatriate employees from Macau’s labour market was seen in all sectors in 2022.  According to the DSEC statistics, the number of imported labour recorded at about 162,391 as of end June this year, a fall of 8,707 or about 5.1% from end 2021.  The overall unemployment rate recorded at 3.7% while the underemployment rate recorded at about 4.1%.  The overall median monthly income fell by 3.2% from end 2021 to MOP 15,300.  The total resident deposit in Macau recorded at MOP 659.64 billion, down 1.2% from end 2021.

    “A new wave of COVID-19 pandemic emerged in Macau and Zhuhai in late June this year. Thanks to the immediate actions and precautionary measures undertaken by the governments of the two cities, the situation was successfully brought under control. However, investors were not confident about the outlook of Macau’s property market in view of the strict border control measures adopted by the city currently.  Most casinos and hotels have made more conservative forecasts for their financial performance this year, expecting a modest recovery only next year. Factors such as the COVID-19 pandemic, hyperinflation, interest rate hikes and shortage of liquidity among real estate companies in Mainland China will continue to affect the economy in the short term, impeding the pace of recovery of the property market,” says Mark Wong, Director of Valuation Advisory Services at JLL Macau.


    According to the DSEC statistics, a total of 1,632 residential sales transactions were registered in 1H2022, down significantly 50.5% y-o-y.  During the period, no new projects were launched.  Investors and potential buyers tended to be cautious in view of the economic downturn and potential interest rate hikes.  The volume of residential transactions shrank.  During 1H2022, only 44 pre-sale transactions were recorded, accounting for only 2.7% of the overall residential transaction volume, a record low in recent years.

    In 1H2022, a total of 3 projects providing 100 new residential units with a total GFA of about 10,372.67 sqm were issued with pre-sale permits.  During the same period, the reconstruction of Sin Fong Garden was completed.  Originally built in the 1990s, Sin Fong Garden was found to have structural issues and classified as a dangerous building in 2012, and started its reconstruction in end 2018. With a height of about 100 m, Sin Fong Garden provides a total of 144 residential units.

    The capital values and rental values of residential properties continued to drop.  In 1H2022, the rental values of high-end and mass-to-medium residential properties fell by 13.2% and 8.3% y-o-y respectively.  The capital value of high-end and mass-to-medium residential properties fell by 8.2% and 7.6% y-o-y respectively, while yields of both recorded at 1.5%.  Some landlords who were in urgent need of cash sold their premise at a discount of 20% lower than the market rate.

    “The number of residential transactions in Macau fell to a historical low in 1H2022.  Mortgage rates will be on the rise in the short term.  Coupled with the high unemployment and underemployment rates, the residential property market will continue to be under pressure in 2H2022. Currently residential prices in general have dropped by about 10% comparing with last year.  If the economic downturn and epidemic continue, potentially a negative wealth effect may occur under the interest rate hike environment, leading to an increasing number of residential mortgages in negative equity.  Consequently, a consumption downgrade may be resulted, creating negative impacts to the economy again.  The government should proactively implement measures to stabilise the property market to alleviate the impact on the overall economy.,” comments Oliver Tong, General Manager at JLL Macau and Zhuhai.


    In 1H2022, a total of 2,018 new incorporations registered in Macau, down 31.8% y-o-y.  Impacted by the epidemics and the recent issues with the VIP market in the gaming sector, demand for office space contracted.  According to JLL Macau Office Index, the rental values for the overall office market and Grade A office market fell by 11.6% and 5.7% y-o-y respectively in 1H2022.  According to the DSEC statistics, the vacancy rate for the overall office market was about 10.5% in the first quarter of 2022.

    In the sales market, the number of office transactions rose by 4.3% y-o-y to a total of 73 in 1H2022, as shown by the DSEC statistics.  In terms of value, it totalled about MOP 519 million, up 4.4% y-o-y.  According to JLL Macau Office Index, the capital values for the overall office market and Grade A offices fell by 6.4% and 6.0% y-o-y respectively.  The yields for the overall office market and Grade A office market recorded at 2.6% and 3.0% respectively.

    “The recent issues with the VIP market in the gaming sector have led to a contraction in office demand from tenants in the related sectors.  Adding that the government will gradually retreat from the private office market, the vacancy rate of the local office market will continue to increase.  Moreover, due to the tight border control measures adopted by Macau, new leasing demand from foreign companies has been weak, with only a few insurance companies looking for space to expand.  With the lack of new supply, the occupancy rates of Grade A office buildings have remained relatively stable.  Office rental level has also been stable, not much change before and after rent review or for the newly committed leases,” says Matt Kou, Senior Manager, Markets at JLL Macau.


    According to the DSEC statistics, the total retail sales recorded at MOP 18.65 billion in the first quarter of 2022, fell a bit by 0.6% y-o-y.  The proportion of tourist spending in total retail sales increased to 26.1%.  Impacted by the weak economy and decreased consumption demand, the retail sales of motor vehicles, cosmetics and clothing recorded negative growth of 10%-20%. However, categories related to daily life or necessities like Supermarkets, Fuels and Communication Equipment recorded significant growth.

    During 1H2022, a total of 156 retail property sales transactions were recorded, down 18.3% y-o-y.  The transactions were mainly concentrated in retail units worth not more than MOP 20 million.  According to JLL Macau Retail Index, the capital values of top-tier retail properties fell by 16.5% y-o-y in in 1H2022, while the retail rental value fell by 16.4% y-o-y.  As of mid-2022, the yield of top-tier retail properties recorded at about 1.9%. “Macau experienced the worst of the COVID-19 pandemic in end June this year.  Most businesses suspended operation and the city was almost in a “standstill status”.  Though the epidemic has been brought under control, the current retail market remains weak.  The market is still worried that the epidemic will come back.  It is expected to take a long time for the business environment to return to normal. During the epidemic, the government allocated MOP 10 billions to fund alleviation programmes for those, including citizens and businesses, affected by the outbreak.  During the recent wave of pandemic, most of the landlords were reluctant to provide rent relief to their tenants, reflecting the fact that the landlords have also started facing pressure due to the weak retail market,” says Daniel Lam, Senior Manager, Capital Markets at JLL Macau and Zhuhai.


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