Second Home Prices Are Booming

Written on April 9, 2007 by admin

Yesterdays bargain-basement apartments now reap today’s penthouse prices
Three years ago, it was the sort of second-hand Toi San flat that wouldn’t get the time of day from a prospective property buyer, even at MOP 170,000.Today, that same three-bedroom flat with 800sq feet in Toi San will cost you MOP 1.27 million. Welcome to Macau’s soaring second-hand property market.

Fast times
Not long ago, several realtors predicted that there would be 10-20 percent price increase in second-home costs. Today’s figures confirm their predictions.
According to Macau’s Finance Services Bureau, there were 16,421 secondary home transactions involving MOP 13.32 billion in the first three quarters of 2006. In Q3 last year, nearly 6,024 properties changed hands, for a total amount of MOP 5.25 billion. Of them, 3,811 (63.3 percent) were residential apartments, or MOP 3.28 billion. During the period of “property tax exemption”, only 940 first-hand apartments were sold for MOP 1.5 billion. By basic deduction, these figures also show that second-hand sales were only one-fourth the cost of new property.

Ho Kin Cheong, Vice-president of Macau Real Estate Commercial Association (Association Comercial de Fomento Predial de Macau), says the average price of secondary housing registered an increase of 30 percent. Apartment prices vary in different districts: on average, you will pay MOP 1,000-1,800 per sq foot in Areia Preta, MOP 1,100-1,600 per sq foot in Av. Horta e Costa, and MOP 1,500-2,000 per sq foot in Taipa. Most of these buyers are Macau residents who favour apartments of about 500 - 800 sq feet.

Ho points out that the going monthly rate for a two-bedroom is about MOP 2,500-3,500. This represents a yield rate of return of 6 to 7 percent, far higher than that offered by banks. Ho adds, flats near the border (Cerco) and in Taipa are preferred by non-local workers. Therefore, the rents for these flats remain stable and so are the prices.

Jimmy Yeung, Sales Director of Midland Macau says that the influx of expatriates will, in turn, stimulate the rental market. The average rental of a residential apartment is MOP 7.5 per sq foot, up 34 percent by comparison with the same period in 2005. Yeung thinks that the present booming economy and expanding expat population will tempt locals to rent for higher rates.

More investors than homebuyers
Yeung explains that in the past the majority of buyers in the property market were homebuyers. Now, they’re mostly investors. Between 1993 and 2003, Macau’s property sector was on the decline. New buildings were exceptions and most of the second-hand properties were 15 years old. Ho adds that some of the flats were 30-years old. Yet some banks in Macau were even willing to provide mortgage credit up to 70 percent of the purchase price. That was then.
Ho believes that the prices of second-hand properties will increase by 15 percent.

Two factors will determine how high rates will go, says Ho. Firstly, when three mega hotels, with their casinos and convention centres open later this year, the government’s policy on the quota of importation of foreign labour will directly effect rental rates. Secondly, the number of flats to be sold in the government’s social housing scheme will also cause rates to leap.

Source | Macau Business

Technorati Tags: macau