Boomtown Macau running out of space for housing

Boomtown Macau running out of space for housing
by Mark McCord
Send by e-mail Save Print The Manhattan, a high-rise complex a stone's throw from Macau's glitzy new casino district, is something of a rarity as it prepares to throw open its doors to well-heeled residents next month.

For a start, the twin towers have been built on the only plot of freehold land in the southern Chinese territory. And it is Macau's only luxury housing development.

While the skyline in Hong Kong, just an hour away by ferry, is dotted with towering monuments to the high-life, Macau has been late getting on the top of the real estate bandwagon despite its recent casino-led economic boom.

That, however, could be about to change.

With an estimated 25 billion US dollars in overseas investment committed to the city's renewed casino sector, investors are beginning to look beyond the roulette and baccarat tables for a good punt.

"We are only at the beginning of the story for Macau," enthused Guy Hollis, international director of property and investment management giant Jones Lang LaSalle.

"The underlying fundamentals are strong, and we think that the jobs being created and the opportunities being created point towards Macau being a good place for long-term investments."

Macau, a former Portuguese enclave, has been Asia's chief gambling haven for more than a century.

Nevertheless, it was not until 2001, when the Beijing-backed government of the largely autonomous city relaxed casino ownership rules, that the sector really began to take off.

The move allowed foreign companies to take a piece of a gambling pie that had previously been monopolised by ageing tycoon Stanley Ho.

The deregulation of the industry brought in a flood of new American-style casino-hotels that have been a big hit with mainland Chinese travellers, newly freed from formerly restrictive travel laws.

Since 2004, the income has transformed Macau from a crime- ridden decrepit no-go zone to a flourishing family holiday destination. And as well as punters in search of a lucky break on the tables, the city is attracting the world's investment banks and high-flying financiers.

"Wall Street is here," as Jonathan Galaviz, partner with gaming and travel research analyst Globalysis, put it.

The economic good times have seen rents rocket, according to Hollis. By his reckoning, average apartments that were going for 300-400 Hong Kong dollars a month five years ago are now fetching up to 6,000 dollars today.

"The average Macau resident cannot afford property here any more," Hollis told a gathering of financiers backing the casino sector's redevelopment.

That sort of growth has attracted property speculators. However, they have encountered a brick wall, as a combination of red tape, lack of transparency and scarcity of space means there has been little or no construction in which investors can place their money.

"There is going to be a major housing shortage unless the government gets to grips with this," said Dan Tagliere, principal and co-founder of MacauLand, the lead developer of The Manhattan.

"The conservative estimate is that 70,000 new jobs will be created by the new casinos, but I think that number is going to be double."

Most of the housing stock in Macau is public accommodation which was built by the then government to house the influx of people fleeing China's Cultural Revolution.

But Macau's tiny size -- it covers just 27 square kilometres (10.4 square miles) and already houses half a million people -- makes further development difficult.

A huge 100,000 square metre reclamation that has been earmarked to house 20 casinos and hotels in the Cotai Strip has been strictly zoned for commercial use only, depriving developers of the chance to build holiday condominiums near their properties.

One alternative is to build across the border in southern China's Zhuhai, a city that emerged in the shadow of Macau, like Shenzhen did near Hong Kong.

"Why don't people live there already? Because the border is not a 24-hour border," said Richard Yue, chief executive of private equity firm ARCH Capital, which is investing heavily in Macau.

"We have an ideal commuter city across the border," he added, "but red tape is preventing that."