Property residency scheme shall see resumption if gov’t measures fail

Friday, December 12, 2008
Issue 555, Page 6
Word count: 965
Published in: Macau Daily Times

By Poyi (Natalie) Leung

Prices of luxury properties in Macau which are mostly purchased by foreigners have slumped by up to 70 percent as intensified by the global economic downturn, said the chief of a local real estate agency yesterday.

Ronald Cheung, the CEO of Midland Macau and Chartered Quantity Surveyor of Midland Realty (Macau), also said that if the SAR government’s recent measures to stimulate the real estate market did not work, they might have to “seriously consider” resuming the property investment immigration scheme.

Speaking to the Macau Daily Times before giving a talk at a half-day seminar themed on the effect of the global financial crisis on local construction and investment at The Venetian Macao, Mr Cheung said the property market in the SAR was currently in the low stages.

“Completed properties’ prices have been cut by about 20 percent whilst advance sales of uncompleted apartments have sunk 50 percent,” Mr Cheung said.

However, he pointed out that high end properties had registered “massive impacts” as their buyers were usually foreigners who now inclined to sell their overseas investment due to the shrinking economy.

“The price fall was massive from about 40 to 70 percent since March when the Guangdong government tightened the visas issuance, but the decrease was more significant in the last couple of months,” Mr Cheung added.

Property prices in dense areas, in contrast, only dropped by within 10 to 20 percent, the real estate agency chief said.

However, thanks to the bailout plans introduced by the SAR government last month to try to revitalise the real estate market, Mr Cheung said property prices were gradually getting stable.

Government officials had affirmed several times in recent months that  they did not yet have any intention to lift the suspension of the property investment immigration scheme.

The Midland Macau CEO told the MDTimes, however, if the government measure of re-launching the four percent interest subsidy for domestic home buyers was not able to encourage more property transactions, officials should then need to “seriously consider resuming the investment scheme which is more about restoring the confidence of investors and landlords”.

“Investment immigration certainly can arouse demand which will stimulate the market,” Mr Cheung said, but added that the government had to be thoughtful or otherwise it could become “politically incorrect” if the scheme was reopened “hastily”.

When asked whether resuming the scheme would push up property prices, Mr Cheung said he did not see a big possibility especially in the current economic environment.

“People will still be cautious in deciding either to own a property or to keep more cash in hand nowadays as a flat could be depreciated by 10 percent in price after half a year if it cannot be sold,” he added.

On the other hand, in foreseeing Macau’s near future under the shadow of the financial turbulence, Mr Cheung said he believed that the SAR would recover faster than most of the other neighbouring countries or regions thanks to its “well established gaming industry” as well as upcoming major infrastructure projects.

“In terms of construction projects, to date only Las Vegas Sands Corp has withheld the expansion on Cotai Strip but other hotel or casino constructions are still going on,” he said.

To him, LV Sands’ decision to suspend the construction on two parcels on the Cotai Strip had brought positive impacts to both the gaming and tourism industries in Macau.

“If the project went on the supply of hotel rooms in Macau would far exceed the demand particularly during this period when tourism industry is quiet, and eventually room rates would be heavily pressured,” Mr Cheung said.

According to the real estate agency chief, Macau was “the least affected” by the financial crisis as it never had a financial system or any major exports to western countries.

Hence, Mr Cheung said the overall situation in the SAR was not bad but as a tourism city, “the most important thing is that economies in neighbouring countries or regions can start to stabilise so that people will be psychologically pacified and then start making travels again”.

“It’s not that people don’t have the money to travel, but they’re afraid to spend in such an economic atmosphere,” he added.

Moreover, the unique gaming industry in Macau also made the city favourable in restoring its tourism sector, Mr Cheung said.

“Although Singapore has already started to build a casino, the scale will not be as big as in Macau,” he said.

“Even though other countries want to build another Venetian, we’re talking about 20 billion dollars and who is willing to pay that while the future is uncertain?” he added.

Following the announcement of the suspension of LV Sands’ expansion projects on the Cotai Strip last month, about 11,000 workers had either lost their jobs or been transferred to other projects.

According to Mr Cheung, however, the affected workers would “come back very soon” to work on the “massive project” of the Hong Kong-Zhuhai-Macau Bridge, as well as the light rail transit and the cross harbour tunnel.

Also, Mr Cheung said the development of Hengqin Island as early as 2009 would “definitely benefit the neighbouring city of Macau”.

Hence, the Midland Macau CEO told the MDTimes all those opportunities would place Macau in an “advantageous position” when compared with other surrounding countries or regions.

“I won’t say whether Macau will surpass Hong Kong, but the rate of our economic rebound and the speed of recovery will be quicker, as Macau isn’t a heavy industrial city or an economic hub but is tourism oriented,” Mr Cheung said.

“The number of tourists has temporarily shrunk as people don’t have the mood to go for a vacation when seeing the stock market slumps, but in the long term I can’t see any harm on the industry,” he added.

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