Real estate market will continue to face headwinds in the second half, due to the pandemic and the economic slowdown – JLL Macau

Macao’s real estate market will continue to be under pressure in the second half of this year, due to the economic slowdown in the SAR, adverse factors brought by the pandemic and potential interest rate hikes, the real estate agency said. JLL Macau in its Macau 2022 Mid-Year Property Review and Forecast.

A total of 1,632 residential sales transactions were recorded in the first half of 2022, down a significant 50.5% year-on-year, with only 44 pre-sale transactions recorded, reaching an all-time high in recent years.

The real estate agency stressed that investors and potential buyers tend to be cautious given the economic downturn and potential interest rate hikes.

“The number of residential transactions in Macau fell to a historic low in the first half of the year. Mortgage rates will rise in the short term. Coupled with high unemployment and underemployment rates, the residential real estate market will continue to be under pressure in the second half of 2022,” said Oliver Tong, Managing Director of JLL Macau and Zhuhai.

According to DSEC statistics, the overall unemployment rate stood at 3.7% while the underemployment rate was around 4.1% at the end of June, while the median monthly income overall fell by 3.2% from the end of 2021 to 15,300 MOP. (US$1,893).

The JLL official also noted that if the economic downturn and the epidemic continue, a negative wealth effect could occur in the environment of rising interest rates, leading to an increase in the number of residential mortgages in funds. own negative, and therefore leading to a deterioration in consumption and negative impacts on the economy again.

Meanwhile, although the new wave of the COVID-19 pandemic that emerged in late June has now been brought under control, investors are still not confident about the outlook for Macau’s real estate market given the city’s strict border control measures. currently Director of Valuation Advisory Services at JLL Macau, noted Mark Wong.

“Factors such as the COVID-19 pandemic, hyperinflation, rising interest rates and liquidity shortages among real estate companies in mainland China will continue to affect the economy in the short term, hampering the pace of real estate market recovery,” Wong added. .

In the first half of this year, capital values ​​and rental values ​​of residential properties continued to decline. The capital value of high-end and mass-to-mid-range residential properties fell 8.2% and 7.6% respectively year-on-year, while the rental values ​​of high-end and mid-range residential properties average mass fell 13.2 percent and 8.3 percent year-on-year respectively.

In addition, JLL noted that demand for office space has contracted, due to the impact of the epidemic and recent issues with the VIP market in the gaming sector, adding that according to figures from the Service Statistics and Census (DSEC), the vacancy rate for the overall office market was around 10.5% in the first quarter of 2022.

“Recent problems with the VIP market in the gaming sector have led to a contraction in demand for office space from tenants in related sectors. Adding that the government will gradually withdraw from the private office market, the local office market vacancy rate will continue to increase,” said Matt Kou, Senior Manager at JLL Macau.

According to the JLL Macau Office Index, rental values ​​for the overall office market and the Class A office market fell by 11.6% and 5.7% respectively year-on-year in the first half of the year.

“In addition, due to the strict border control measures adopted by Macao, new rental demand from foreign companies has been weak, with only a few insurance companies seeking space to expand,” he said. declared.