JLL: Government stimulus needed amid asset slump denting economic confidence

MACAU and HONG KONG, 19 February 2025 – Macau property prices continued to adjust in 2024 due to the weakening external economic conditions, according to JLL's "Macau Property Market Review and 2025 Market Forecast" released today. Although rental performance improved relatively, prolonged high interest rates have led to weak investment sentiment, resulting in ongoing challenges for property sales in 2025.

According to figures released by the Macau Gaming Inspection and Coordination Bureau, the total gaming revenue in 2024 reached approximately MOP 226.78 billion, a year-on-year increase of 23.9% and about 77.5% of pre-pandemic levels. The revenue from the VIP market in the first three quarters of 2024 was approximately MOP 40.77 billion, a year-on-year increase of 25.5%, accounting for about 24.1% of the overall market.

The Gross Domestic Product (GDP) of Macau in the first three quarters of 2024 reached approximately MOP 285.34 billion, a year-on-year increase of 11.5%. According to the GDP calculated based on expenditure, the increase was mainly driven by trade exports, fixed capital formation, and private consumption expenditure, which increased by 26.4%, 7.9%, and 5.8%, respectively. Government final consumption decreased by 10.1% year-on-year. Household expenditure outside Macau increased by 13.6% year-on-year to MOP 10.71 billion.

Data from the Macao Government Tourism Office showed that visitor arrivals to Macau in the first eleven months of 2024 reached approximately 31.888 million, a year-on-year increase of 26.2%. According to the Macau Statistics and Census Service, mainland Chinese visitors accounted for 70.4% of the total visitor arrivals, while visitors from Hong Kong accounted for 20.5%. Tourist arrivals from Taiwan recorded significant growth and increased by 69.1% year-on-year. As of the end of November 2024, Macau had a hotel room supply of 42,285, down 7.2%, or 3,263 rooms, compared to the rooms recorded at the end of 2023. This was mainly because the Sheraton Grand Macao in The Londoner Macao was under renovation. The cumulative hotel occupancy rate was 86.1%, with an average length of stay of approximately 1.7 nights.

In 2024, Macau practically reached full employment. According to the Macau Statistics and Census Service, the overall unemployment rate and the underemployment rate fell to 1.7% and 1.5%, respectively, matching pre-pandemic levels. The number of foreign workers continued to increase and was approximately 183,304 as of end-December, an increase of 6,643 compared to the end of 2023, representing a growth rate of about 3.8%. In terms of income and savings, the median total income rose to MOP 18,000, a year-on-year increase of 2.9%. Local residents' deposits amounted to approximately MOP 760.89 billion, a year-on-year increase of 7.9%.

Mark Wong, Director of Value and Risk Advisory at JLL in Macau, said: "Macau's local economy remains stable and continues to improve, supported by policies promoting diversification and transformation of the local economic structure. However, the city's economy still heavily relies on tourism and entertainment, while other sectors related to people's livelihood face pressure. The lack of overseas investment and cautious investor sentiment, due to the high interest rate environment, continue to challenge property investment. Additionally, the economic and interest rate policies under the new US administration are impacting Macau's real estate market, with confidence in the market recovering slowly. Looking ahead to 2025, local developers and investors are expected to seize opportunities to release more properties to alleviate the pressure of high-interest loan financing, with investment returns anticipated to gradually recover."

Transaction volume in the residential market rose by 4.9% year-on-year to 3,057 in 2024, according to data from Macau's Financial Services Bureau (DSF). The market also recorded a total of 230 pre-sale transactions. New home sales increased after new projects were launched in mid-2024. However, this trend was not sustained in the second half of 2024. The number of new home sales remained at a low level.

In 2024, only two projects with a total of 2,072 flats were issued pre-sale permits. The majority of the new supply came from Pearl Metropolitan, a new project in the Macau Peninsula, which could provide a total gross floor area of 238,505 sq m. A total of 2,140 flats were under construction or completed in Macau as of the third quarter of 2024. In the short term, a total residential gross floor area of 145,012 sq m will be completed. This includes major projects such as Project CALCADA DO GAIO, Soho Residence, Project ESTRADA DE S. FRANCISCO, The Zenith, and Lake YOHO.

The residential leasing market remains in an upward cycle. According to the JLL Macau Property Index, rents of luxury flats rose by 2.5% year-on-year in 2024, while the rents of mass residential flats surged by 13.7% year-on-year. The performance of asset values, however, moved in the opposite direction due to the high rates environment. In 2024, capital values of luxury residential properties dropped by 11.4% year-on-year, while capital values of mass residential properties fell by 9.7%. The investment yields of luxury and mass residential properties grew slightly to 2.0% and 2.3%, respectively.

Wong said: "Macau's home prices have plunged since the pandemic, with overall prices dropping over 20% from the market peak. Some units have even seen declines of up to 30%. Developers have to adopt aggressive pricing strategies to boost home sales since the financing costs are high. However, the price correction in the housing market has led to substantial losses for flat owners who bought residential flats in recent years, which has also affected their investment and consumption interests. Additionally, despite an adequate housing supply, demand remains limited."

“Currently, the price gap between some second-hand private homes and recently launched economic housing has narrowed. With private housing prices have dropped, they have become more attractive, affecting the demand for economic housing. While public housing generally receives higher mortgage ratios from banks, private housing is limited to a maximum 70% loan-to-value ratio under existing guidelines. The government should consider reasonably increasing this ratio, accounting for buyers' affordability, to prevent further economic and property market deterioration. Measures to stimulate the private housing market would also help address the large economic housing inventory," he added.

Residential market - Changes and 2025 forecast

In the first eleven months of 2024, a total of 4,103 new companies were registered in Macau, a decrease of 12.7% year-on-year. Leasing demand is primarily driven by relocation needs stemming from cost-saving initiatives. According to the JLL Macau Office Index, overall office rental value fell 4.5% year-on-year in 2024, while rental values of Grade A office buildings fell by 6.0% compared to the end of 2023. Data from the Bureau of Statistics shows that as of the third quarter of 2024, the vacancy rate of Macau office buildings was about 12.0%.

In the office investment market, office prices continue to search for a bottom under the high rates environment. According to the JLL Macau Office Index, overall office capital value in 2024 fell by 10.9% year-on-year, while the capital values of Grade A office buildings dropped by 8.0%. The yields on overall office buildings and Grade A office buildings were 3.0% and 3.2%, respectively.

"Office rents and capital values had already undergone significant adjustments after the government moved out of the private office market to their own office buildings a few years ago. As the vacated office space has gradually been absorbed by the market in recent years, we have observed that office rents, prices, and vacancy rates have begun to stabilise. Looking ahead, we expect tenants to maintain their current strategies, with leasing demand remaining relatively stable and continuing to improve in the short term. However, the government is currently constructing new office buildings, which will be completed in the near future. When these buildings are finished, some office space will re-enter the private office market. If the economy does not improve, Macau's office market will face significant pressure in terms of absorption," added Wong.

Office market – Changes and 2025 forecast

Due to reduced consumer spending and increased outbound travel by local residents, the total retail sales value for the first three quarters of 2024 reached only MOP 53.48 billion, representing a 16.9% year-on-year decrease. Figures from the DSEC show that retail sales of Watches, Clocks & Jewellery, Leather Articles, and Goods in Department Stores recorded double-digit declines. Only Goods in Supermarkets saw mild growth in retail sales, climbing 0.7% year-on-year. Although the government has launched campaigns such as the Macao Spending Rewards programme to boost the economy, their impact remains to be seen.

The JLL Macau Retail Index shows that the rental values of first-tier street shops stayed firm, thanks to tourism recovery. However, capital values dropped by 9.4% year-on-year. As of the end of 2024, first-tier street shops recorded a yield of approximately 2.4%. The delinquency rate on commercial real estate loans increased to 4.8% at the end of November last year, the highest level in recent years. More distressed retail properties were released for sale. A batch of retail shops at La Cite sold last year, with a yield of 4%.

Wong said: "The popularity of outbound travel overseas and Northbound Travel for Macau vehicles to mainland cities has led to an outflow of domestic spending. Coupled with a decrease in per capita tourist spending, this has hindered the recovery of the retail sector. Looking ahead to 2025, we expect retailers to actively seek prime locations to open new stores, including newcomers from abroad, following improvements in Macau's tourism industry and the planning of more major events this year. The retail property market will likely maintain a polarised trend, with leasing activities remaining active for prime shops in tourist areas, while neighbourhood shops continue to face pressure."

Retail market – Changes and 2025 forecast