Property market regulations out this week

Monday, September 27, 2010
Issue 1125, Page 2
Word count: 847
Published in: Macau Daily Times

By Poyi (Natalie) Leung

The Government will announce a new round of measures to further regulate the private property market this week, Chief Executive Fernando Chui Sai On said on Saturday.

Speaking to reporters at the Macau airport before departing for Nanchang in Jiangxi Province to attend the Expo Central China 2010, the Chief Executive said the Secretary for Public Works and Transport will introduce the details of the measures to the public this week.

The official delegation cancelled the trip and returned to Macau on the same day, as the flight was unable to land in Nanchang due to bad weather conditions.

The Working Group for the Promotion of Sustainable Development in the Real Estate Market had met last Monday where it has been disclosed that the measures will include mortgage guidelines, taxation, land supply, transformation of industrial buildings, enhancement in information transparency, real estate agent regulations and also laws for the pre-sale of property before the completion of construction.

The Chief Executive also said in the traditional Chinese culture, having a stable place to live and go after finishing work every day is very important to local people, adding that it is the Government’s “responsibility” to help them achieve that.

He reiterated that the Government understands the conditions of the people who have been on the waiting lists for a long time, and the goal now is to assist no matter the affordable or social housing hopefuls to move into a public housing unit as soon as possible.

Chief executive officer of property agency Midland Macau, Ronald Cheung, told the Macau Daily Times yesterday that what he has heard is that the Government may tighten the loan-to-value ratio for mortgage loans and increase the transfer stamp duty which currently stands at 0.5 percent.

He said he hoped that the transfer stamp duty will not be increased to more than one percent.

Based on the official statistics, Cheung said a majority of the private property buyers, accounting for 91 percent, were Macau people. Hence he added that the Government shouldn’t blame the foreign investors for stimulating the property prices in Macau.

“Fundamentally Macau isn’t able to attract Hong Kong people or mainlanders [to buy real estate in Macau]. The situation is now very different from the past, especially in 2007 when local buyers accounted for only 50 percent,” he said.

Instead, Cheung suggested the Government implement preventative measures in case when the economy goes down which triggers collapse in the local property market and inevitably suspension or even permanent halt to a large amount of real estate construction.

However, he warned that the Government should not “interfere too heavily”, as it is a “free market” that will adjust itself automatically when it reaches a certain point.

“The Government can interfere [in the property market] but it’s just like a painkiller, after the effect goes away you will still feel the pain. Unless Macau uses heavy-handed measures such as China…but when the market situation improves the rebound effect will be even stronger,” he said.

Low interest is to blame

According to the Midland Macau CEO, the core problems attributed to the soaring property prices in Macau are “low bank interest rate and inflation”.

He said that currently the interest rate is below one percent – which is “very low” – and local banks have relaxed lending criteria which thus “encourages” people to purchase real estate even if they cannot afford it.

“The real interest rate is the nominal interest rate minus the inflation rate. If the nominal rate is zero percent and the inflation is three percent, that means a person will lose MOP 30,000 a year for borrowing MOP 1 million from a bank,” he explained.

In addition, since confidence in the local property market is strong at the moment, Cheung told the MDT that transactions have reduced as owners are holding on to their apartments and believe that they can be sold at a higher price at a later time.

The climbing inflation rate in Macau has also driven people to buy property instead of keeping money in hands, he pointed out.

Cheung said although the measures have not yet been announced, he expected that they will not be able to cool down the property prices in a long term.

Managing director of Savills Limited (Macau), Franco Liu, also agreed that the Government should be cautious when trying to interfere in the local property market.

Liu told the MDT that the 19,000 public housing unit construction plan will certainly help cool down the property prices, and the tightening of the loan-to-value ratio for mortgage loans will also mainly affect local buyers who usually purchase low- and mid-priced apartments.

Therefore, he said the Government may consider implementing more specific measures after more public housing units are built.

Nevertheless, Liu said the Government’s decision to regulate real estate agents is a good move to boost buyers’ confidence, as certain malpractices still exist in the industry.

He also welcomes the measure to enhance information transparency, adding that both non-local and local people have no formal way to find out property transaction records in Macau.

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