Speaking for the second consecutive year at a lunch hosted by the British Chamber of Commerce in Macao yesterday, Simon Smith, regional head of research and consultancy at Savills, reflected on his presentation from January 2024 and the pessimistic backdrop at the time.
Persistently high interest rates, China’s sluggish economy, and rising geopolitical tensions were among the noted uncertainties. But just twelve months later, Asia-Pacific economies have proven resilient, expanding faster than prior projections, he remarked. Whether investors should expect another surprise at the end of 2025 remains to be seen.
[See more: Macao’s property prices could fall by as much as 11 percent this year, says expert]
“The issues facing the property market haven’t gone away,” Smith commented. Though he is generally sanguine about the industry’s dynamics, he expressed uncertainty stemming from elevated borrowing costs. Investors were reminded of this after the US reported higher-than-expected inflation of 3.0 percent in January, strengthening the case for a single rate cut by the Federal Reserve this year, and dampening hopes for a second already tested by the inflationary impact of trade tariffs.
Smith highlighted an upward swing across the region despite the struggles occurring in China’s property market. Asia-Pacific investment volumes jumped 14 percent in 2024, registering US$167 billion, according to his presentation. Japan led the bounce, drawing in US$48 billion, a 20 percent increase from a year earlier and accounting for almost a third of APAC’s investment volumes. Australia rose 55 percent while South Korea gained 33 percent, offsetting China’s 19 percent drop.
Artificial intelligence driving real estate investment
Among property types, data centres and logistics are driving industrial demand, due in part to rising AI investments. Global investments in data centres exceeded US$100 billion last year, more than the last three years combined. Tech companies like Amazon, Microsoft, Alphabet, and Meta are ramping up AI related spending, exceeding US$160 billion in capital expenditure in the first three quarters of 2024, more than double the amount in 2019.
Supported by the structural growth of e-commerce and reinforced by the pandemic, logistic assets are among the most sought-after opportunities in the Greater Bay Area (GBA) according to the Greater Bay Area Residential and Investment Market 2024 Review and 2025 Outlook, released by global commercial real estate firm Cushman & Wakefield.
[See more: Top realtor calls on officials to restore public confidence in Macao’s property market]
Charli Chan, Cushman & Wakefield’s deputy managing director, wrote in a press release in January that while logistics accounted for 22 percent of total GBA investment volume in 2024 from 9 percent a year earlier, “the abundant new supply of industrial, logistics, and office premises, combined with relatively few buyers in the market [are] going to increase competition and bring downward pressure on property prices.”
Macao’s property woes
Savills’ Smith voiced similar concerns, highlighting that the rapid development of neighbouring Hengqin Island will likely lean towards being yield-decretive before becoming yield-accretive, compounding the real estate challenges already unfolding in Macao.
Even as the economy draws closer to its pre-pandemic levels, Macao’s office vacancies have risen despite a lack of new Grade A supplies over the past three years, Smith said, adding that the influx of new government owned buildings will take time to absorb, exerting downward pressure on rents in the Grade B space.
Smith concluded that a valuation adjustment was necessary, pointing out that the current slowdown is a residual effect of previous years of rapid growth. As for how 2025 emerges, he said he will have to wait and see, underscoring a particular concern about deals drying up as investors are wondering whether an inflection point is approaching.
[See more: The residential property price index fell by nearly 12 percent in 2024]
Experts are forecasting up to 11 percent drop in property prices after the average price index fell by 12 percent last year, while others see the market taking two more years until a potential rebound materialises. The value of new residential and commercial property loans approved last December fell month on month, according to data released by the Monetary Authority of Macao.
General appetite to enter is subdued, remarked Hugo Maia Bandeira, founding partner at Macao-based CFB Lawyers speaking to Macao News. “Compared to recent years, most investors are still questioning whether the market has bottomed out and, more importantly, if an upward trend is on the horizon,” he said, adding that potential investors lack the liquidity to pursue opportunities.
In his closing remarks, Smith stated that the demand does exist in Macao, particularly for attractive projects at competitive prices, though admitted that both are becoming increasingly harder to find along with fewer qualified buyers.
