However, the real estate sector in Macau showed signs of consolidation for the same period, seeing a retreat in the sales volume.
In 1Q 2008, Macau's Gross Domestic Product (GDP) grew strongly by 31.6% year-on-year (YoY). In the wake of rising domestic household income and falling interest rates, private consumption expenditure in Macau registered healthy growth at 9.6% YoY for the same period. Other encouraging fundamentals include an optimistic labour market, with the unemployment rate maintaining at a low level of 2.9% for the three-month period ending July 2008, and retail sales growth of 46.4% YoY in 1Q 2008.
Amid the encouraging economy performance, the changes of government policy in Macau and Guangdong created some challenges in the market. In an attempt to alleviate growing competition in the gaming industry, the Macau government announced in April 2008 that no new gaming licences would be issued and no casino development plans would be granted, including the application of new gaming tables in existing casinos. Besides, in May 2008, the Guangdong provincial government imposed restrictions on Individual Traveller Scheme to further control the number of Mainlanders visiting Macau. Although both policy changes clouded the market sentiment, the impact should be minimal in the short to medium term.
For example, the total gross gaming revenue increased 47.6% YoY to over MOP 29.2 billion in 2Q 2008, registering a total of MOP 59.2 billion in the first half of 2008, which accounted for 71% of 2007's total. Meanwhile, the total number of visitor arrivals increased 18.1% YoY to 14.9 million in the first half of 2008, and per-capita visitor spending rose 9% YoY in 2Q 2008.
In the hotel market, the average hotel occupancy rate flied high at 73%, although the total number of hotel rooms expanded by 22.8% YoY to 16,235 as at the end of June 2008. Johnny Lai, Deputy General Manager of Colliers International Property Services (Macau) Limited, commented, "In anticipation of the gradual completion of new mega resorts, comprising casinos and entertainment facilities, along with the ongoing development of Meetings, Incentive tours, Convention and Exhibitions (MICE) industries, this will underpin demand for hotel rooms from business travelers, as well as family-oriented visitors going to Macau for their vacation."
In the residential sector, individual vendors have been prompted to lower their asking prices by the uncertainties in the external environment, despite the low interest rate environment and the genuine occupational demand fundamental. Meanwhile, there was a significant retreat of the number of sale transactions, seeing the volume contracted by 34.5% YoY to 8,638 units during the first half of 2008. In the residential leasing sector, with the number of imported employees in Macau growing 30% YoY to total 95,471 as at the end of May 2008, the rising accommodation demand by expatriates continued to drive rentals upwards.
Meanwhile, individual residential developments are going to launch for sale. For example, The Venetian is planning to launch its luxury apartment development, with unit size ranging from 2,000 sq ft to 3,300 sq ft, in Cotai for sale. Furthermore, the sales launch of the Chinese Estates' project at Avenida Wai Long in Taipa is expected before the end of 2008. The project comprises about 3,500 residential and serviced apartment units and is scheduled to complete in stages from 2011 onwards.
"The outlook for the residential market in Macau remains mixed and property prices may encounter a downward pressure in the near term, due to the uncertainties of a slowing global economy and continuing credit tightening conditions. However, the strong local economic growth, booming tourist sector, surging gaming revenues and the deepening of negative real mortgage rates on the back of rising inflation will help offset some of the downsides." commented Simon Lo, Director of Research and Advisory, Colliers International (Hong Kong) Limited.
