Macau Casino Boom May Push Luxury Home Prices Up 30% in a Year - Sunday 12th of June 2005

Cosco Property Development Ltd. has 1,800 people on the waiting list to buy apartments in a planned condominium in Macau, China's gambling capital. Problem is, the building will only have 56 units.

They call and say: `Just get me a unit,' without even asking the price,'' said Li Kejing, a manager with Hong Kong- based Cosco Property, a unit of China's largest shipping company.

Gaming companies including Las Vegas-based MGM Mirage are pouring more than $12 billion into building new casinos in the former Portuguese colony, which may overtake the Las Vegas strip this year as the world's biggest gaming center by revenue. Demand for houses for expatriates and Chinese gamblers is likely to lift luxury residential property prices 30 percent in the next 12 months, after they almost doubled last year, agents said.

If you want to invest in Macau property, do it now,'' said Bich Pham, who helps manage $700 million of stocks at Hong Kong- based TAL Global Asset Management Ltd. Macau will be bigger than Vegas.''

Hoteliers and Las Vegas operators including MGM and Steve Wynn's Wynn Resorts Ltd. may spend as much as $20 billion in total in Macau after the 42-year gaming monopoly of billionaire Stanley Ho ended in 2002. The investments spawned plans for roads, apartments and a 29-kilometer (18-mile) bridge to Hong Kong to bring tourists to the city, which generated $5.1 billion in gambling revenue last year.

Venetian Replica

Las Vegas Sands Corp., which owns Sands Macao, plans to open a $1.8 billion replica of the Venetian casino in the first half of 2007, the year MGM Mirage will open its 600-room venture. Wynn's $1 billion venue is slated to open in 2006. The number of gaming tables may quadruple to 4,000 by 2007, said Manuel Joaquim das Neves, director of Macau's gaming control board.

New casinos in Macau, a city of 470,000 people that abuts China's southern province of Guangdong, may draw 30,000 foreign workers in the next few years, said Tim Lei, an investment manager at Midland Realty (Macau). Macau has about 10,000 luxury apartments, and may add 5,000 in the next two years, he said.

Many Hong Kongers and mainland Chinese are buying these luxury apartments, expecting demand to rise when these foreign professionals arrive,'' said David Faulkner, a Hong Kong-based director of Colliers International Property Consultants Inc., a Boston-based real estate agency.

Prices of Macau apartments that cost HK$3 million ($386,000) or more rose between 50 and 100 percent'' in 2004, said Dick Fong, a director at Midland Realty (Macau) Ltd. Property prices in the prime Nape and Zape districts -- where the top-grossing Casino Lisboa and Sands Macau casinos are -- have exceeded HK$3,000 a square foot, from less than HK$2,000 a year ago, said Jim Ng, a Macau-based associate director at Savills Plc, the third-largest U.K.-listed property company.

Property Gamble

There are many retail speculators behind Macau's booming property prices,'' said TAL Global's Pham, Even after the increases, Macau property prices are cheap.'' Top-end property costs about HK$3,000 per square foot in Macau, compared with HK$10,000-HK$15,000 in Hong Kong, he said.

Macau trumped Atlantic City as the world's second-biggest gaming market last year after the opening of Sands Macau pushed gambling revenue 44 percent higher to $5.1 billion.

There's a lot of interest in Macau, a lot of real estate activity,'' said Midland Realty's Lei.

Sea and Sands

At almost HK$4,000 a square foot, La Oceania, a 90-unit condominium next to the Sands Macao casino, has the city's priciest apartments, said Midland's Fong and Savill's Ng. Cosco Property developed La Oceania.

In Hong Kong, an hour away by high-speed ferry, $386,000 buys a 431 square-foot (40 square-meter) apartment with communal pool a few minutes by car from the business district, according to Web site Gohome.com.hk. In Macau, the same amount buys a 1,200 square-foot seaside unit in Taipa, near the stretch of reclaimed land called Cotai, earmarked for a $12 billion replica of the Las Vegas Strip.

In Las Vegas, the sum buys a 2-bathroom 1,342 square-foot apartment in a low-rise condominium in Clark County, home to the gaming strip, according to Web site lasvegashirisecondos.com.

Some mainland Chinese are buying Macau property to get right of residence, said Savills's Ng. Macau grants residency to skilled workers who invest at least 1 million patacas ($124,876), plus 500,000 patacas in bank deposits.

The price increases are quite attractive,'' said Liu Shi, 36, who runs a food-flavoring company in China's northern province of Hebei, in a June 10 interview in Macau. We hope to get our own property while it's still affordable.''

Some developers and real estate agents say prices in Macau may be rising too fast.

Empty Apartments

Property buyers looking to sell their Macau apartments for a profit in three to five years are getting rental yields of as little as 3.5 percent because more than 30 percent of Macau's luxury apartments are vacant, said Savills's Ng.

Prices in certain parts of Macau's property market are rising too fast,'' said Deborah Ng, a deputy director at the Monetary Authority of Macau. Ng said the central bank has no immediate plans to try to cool the market.

Macau's property prices bottomed in 2003 after a decade-long slump that began in 1993, said Ng. Apartment prices at Taipa's Ocean Garden Estate fell from HK$3,000 a square foot to HK$1,000 in 2003, returning to HK$3,000 this year, she said.

While luxury property prices have rebounded, average prices in Macau are still 20 percent from their 1993 peak, Ng said.

Banks such as Luso International Banking Ltd., the Macau unit of China's Xiamen International Bank., are betting prices will rise, offering mortgages at 100 percent of the assessed property value.

Every indicator -- from economic growth to the unemployment rate -- shows that Macau is on the uptrend,'' said Patrick Chau, assistant general manager at Luso International. We won't see any problems in the next three to five years.''

Macau's economy grew 8.5 percent in the first quarter after expanding 28 percent to 82.7 billion patacas in 2004.

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