JLL: Macau's real estate market remains challenging in 2024

MACAU and HONG KONG, 7 February 2024 - JLL today released the "2023 Macau Property Market Review", which indicates that Macau's economy has gradually recovered. However, property assets continue to be under pressure due to factors such as high interest rates, and it is expected that the recovery of the Macau property market will remain slow.

According to figures released by the Macau Gaming Inspection and Coordination Bureau, the total gaming revenue in 2023 reached approximately MOP 183.06 billion with a year-on-year increase of 333.8%. The growth momentum in the second half of the year was even more significant, reaching over 60% of pre-pandemic levels. The revenue from the VIP market in 2023 was approximately MOP 45.19 billion with a year-on-year increase of 345.3%, accounting for about 24.7% of the overall market. It reached about 30% of pre-pandemic levels.

The Gross Domestic Product (GDP) of Macau in the first three quarters of 2023 reached approximately MOP 253.04 billion, indicated a year-on-year increase of 77.8%. 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 87.3%, 13.0%, and 11.6%, respectively. Government final consumption remained relatively stable, with a slight decrease of 0.6% compared to the previous year. Household expenditure outside Macau increased by 88.2% year-on-year to MOP 95.02 billion.

Data from the Statistics and Census Service showed that the visitor arrivals to Macau in 2023 reached approximately 28.213 million, a year-on-year increase of 394.9%. The visitor arrivals from Hong Kong increased to approximately 7.196 million, accounting for 25.5% of the total visitor arrivals and approaching pre-pandemic levels. Mainland Chinese visitors accounted for 67.5% of the total visitor arrivals, reaching about 70% of pre-pandemic levels. As at the end of 2023, Macau had a hotel room supply of 46,552, an increase of 8,854 compared to the end of the previous year, representing a 23.5% increase. The cumulative hotel occupancy rate was 81.5%, with an average length of stay of approximately 1.7 nights.

In 2023, the employment situation in Macau saw improvement as the labour market quickly filled with foreign workers. Figures from the Macau Statistics and Census Service, the number of foreign workers was approximately 176,661 as at end-December, an increase of 21,749 compared to the end of 2022, representing a growth rate of about 14.0%. The overall unemployment rate and the underemployment rate fell to 2.3% and 1.4%, respectively. In terms of income and savings, the median total income rose to MOP 17,500, a year-on-year increase of 16.7% and a historical high. Local residents' deposits amounted to approximately MOP 707.46 billion, a year-on-year increase of 1.4%.

Mark Wong, Director of Value and Risk Advisory at JLL in Macau, said: "Macau's local economy has gradually stabilised, and it is moving towards a path of diversified economic development. With the tourism industry making a strong recovery, there has been significant support for rental prices of commercial properties and residential units in the vicinity. However, investment sentiment remains subdued under a high-interest environment, as investors adopted a cautious stance towards property investments. Consequently, the market has witnessed an increase in the number of distressed assets available for sale, exerting downward pressure on property values. Looking ahead to 2024, the market anticipates the US interest rate cycle to reach its peak and the Federal Reserve is likely to begin cutting rates in the second half of the year. However, given the volatile external environment, the property market's trajectory is expected to resemble that of the previous year."

Figures from the DSEC show that the total retail sales increased by 53.0% year-on-year to approximately MOP 65.64 billion in the first three quarters of 2023, marking the strongest performance on record. The proportion of tourist spending in total retail sales returned to pre-pandemic levels, reaching 41.2%. While most retail categories recorded significant growth in sales, the Chinese Food Products posted the strongest growth of 346.8% year-on-year. Retail sales of Leather Articles, Goods in Department Stores, and Watches, Clocks & Jewellery also recorded a robust growth of over 70% year-on-year, followed by over 50% year-on-year for Clothing and Footwear, and 35% year-on-year for Cosmetics and Goods in Pharmacies. However, Goods in Supermarkets experienced an unusual decline in retail sales, dropping by 3.9%.

The retail property market recorded a total of 248 transactions in the first eleven months of 2023, down 27.1% year-on-year. JLL Macau Retail Index shows the rental values of prime street shops rebounded 9.7% in 2023. Despite the improvement in rental values, capital values of prime street shops fell by 7.0% year-on-year, reflecting subdued investment sentiment in a high interest rate environment. As at end-2023, prime street shops recorded a yield of approximately 2.2%.

"Last year, Macau saw a promising recovery in visitor arrivals, yet such was accompanied by changes in shopping patterns. We observed that retail businesses focused on high-end and mass-market segments performed well, while the mid-priced retail market showed a weaker performance. Additionally, the outflow of domestic spending due to outbound travel to overseas and mainland cities had an impact on retail establishments in residential areas. As factors such as the weakening Chinese Yuan and the duty-free policy in Hainan Island will continue to reshape the retail landscape in neighbouring regions, it is imperative for Macau to allocate more resources to enhance the tourism and shopping experience, with a focus on attracting higher-end visitors," Tong commented.