New Housing Reforms in the GBA 2020: How will Macau’s real estate market be impacted?
It’s said that when China sneezes, Hong Kong catches a cold. Perhaps the same could be said if it’s Hong Kong that’s sneezing … will we here in Macau become bed-ridden with the flu?
After our new Chief Executive Mr. Ho Iat-seng takes office in December what Christmas goodies can we expect him to dispense to his flock? Those of us in the real estate industry wait with interest to see how he meets the challenges ahead. Will sentiment and even housing policies spill over to us in Macau as a result of the protests and economic slowdown in Hong Kong, the ongoing US-China trade war and greater competition from the 9 neighbouring cities in Guangdong that under the central government’s Greater Bay area scheme are being developed into an economic powerhouse?
Then there are the complex issues of dealing with Macau’s casino licenses due to expire in the coming years. With the goings on globally and across our borders, our casino industry many face a retraction which in turn is bound to have a negative impact on the livelihood and lifestyles of the Macau people. So it’s doubly important that Mr. Ho and his team focus yet further on the diversification of the economy to maintain stability and ensure that this re-tendering process satisfies the many stakeholders. This includes better (more appropriate services-related) education, improved transportation, non-gaming services and entertainment … and yes, housing.
In Hong Kong, the world’s most expensive property market, Chief Executive Carrie Lam recently announced some new housing and land supply housing policies in response to the months of social unrest and disruption. Aimed at the 20% of Hong Kongers who live below the poverty line, these include more compulsory land purchases for housing, cash for students, to increased subsidies for low-income families. HKD5 billion is to be set aside to provide a total of 10,000 units of transitional housing within the next three years. A Starter Home pilot project at a private residential site in the New Territories is expected to provide about 1,000 units for sale at “below-market prices.”
Chief Executive Lam also pledged to help first-time homebuyers by expanding eligibility under the Mortgage Insurance Programme. For a first-time home buyer, the cap on the value of property eligible for a mortgage loan with a maximum cover of 90 per cent loan-to-value ratio will be raised from the existing HKD4 million to HKD8 million.
Across from Hong Kong in Shenzhen policy makers are determined not to become a victim of their own success in the housing market, aggressively building and opening new units at rental rates significantly below prevailing market levels. Unlike the means-tested-for-lower-income-groups social-welfare housing that Hong Kong is thinking about reintroducing, these are market-based housing units, open to anyone to apply who meets certain criteria. These new apartments are intended as a ‘stabilizing force’ for the ‘healthy development’ of the private residential market. They are aimed at housing market ‘pre-entrants’ – those not yet ready to buy their own home. Their rents, which are about 40% below those in nearby neighborhoods, will be controlled, i.e., will not fluctuate by more than 5% a year.
Rental controls have been mooted before in Macau … I wonder now if we’ll be seeing this come into play anytime soon?
Certainly many feel that there needs to be a review and relaxation of Macau’s first hand buyer mortgage policy. A gap exists between how much buyers can borrow for properties selling at under MOP8M and over MOP8M. If within MOP8M, a borrower can apply for a mortgage loan with a maximum cover of 80% loan-to-value ratio so he needs only to a 20% cash down payment. On the other hand, if the property for sale is anything over MOP8M the buyer can only have a 50% loan-to-value ratio – so needs to come up with a long more cash for the down payment. A graduating scale to help fill the 20-50% gap would surely be more helpful in getting first time buyer working class families on the property ladder?
So much for the first time buyers in Macau. We see further incentives needed to help middle class families upgrade from either an older to a newer property, or more likely from a small to a larger home as their family grows. They may for example be living in an MOP8M, 2-bedroom unit in Nova City and need to upgrade to 3-bedrooms, which will cost MOP11-12M. Some support with the ‘top up’ funds should be considered.
And how about help to kick start the bigger, luxury end of the market that is so sluggish? One suggestion would be to drop the 10% additional stamp duty to non-Macau ID holders to buy properties that are over, say MOP15M. It’s a balancing act I know; it would loosen the floodgates of hot Chinese money which understandably China seeks to avoid but I’m sure there are ways to verify that the money is ‘clean’.
Without wishing to capitalize on Hong Kong’s misfortunes, when it comes to commercial real estate, I believe we should be opening our arms out wide to businesses feeling the effects of the past few months in Hong Kong. We’ve received numerous phone calls and emails recently from just such companies (financial services, hedge funds, insurance and the like), fearful for the future and looking around for temporary or even permanent ‘safe havens’… Why should Macau lose these businesses to Singapore, Taiwan or KL? We’re just an hour across the waters, and besides, we’re ‘family’. Give them a year of relaxed policies on blue cards and licensing. It’s a golden opportunity for us to further diversify our economy and makes us a perfect stepping stone into China’s new baby Hengqin – where swathes of unoccupied offices loom on the horizon.
Yes, our Mr. Ho and his new government will need to be pragmatic, proactive and forward-looking, innovative and determined. He’s not a civil servant lifer. Rather I gather his business acumen and experience is admired by many. Exciting times; we have high hopes!