Macau often lives in the shadow of nearby Hong Kong. However, the former Portuguese colony has some strong points which even its larger neighbor can’t claim.
You might be familiar with Macau because of its casinos. The city surpassed Las Vegas back in 2007 to become the world’s top gambling destination. Nowadays, Macau’s gaming sector brings in over 7 times Las Vegas’ revenue – an astonishing figure.
Naturally, this strong growth helped its economy thrive over the past decade. Macau’s GDP rose by over 20% in both 2010 and 2011, making it the world’s fastest growing market during that time.
The city’s reliance on the gambling industry means that growth isn’t stable or consistent though. For example, Macau’s GDP fell by 21.5% in 2015 when China began cracking down on corruption. The economy picked up since then and is now growing at double digit rates once more.
Why should you invest in Macau? It doesn’t have a stock market. Nor are there anywhere near the amount of business opportunities as in Hong Kong. Macau’s population of around 600,000 is less than 10% of its neighbor’s.
With that said, there’s several reasons why you might want to consider investing in Macau.
Freehold Property Ownership
It’s easy to overlook that Macau is the only part of China which allows freehold ownership of real estate. Locals and foreigners are both able to own property on a permanent basis.
Compare this to mainland China where all land is owned by the state. Land in Hong Kong is on a leasehold which expires in 2047. Locals anticipate the government will renew all leases at that time. But nothing is certain – especially given Hong Kong’s current situation.
Real estate prices in Macau are only about half Hong Kong’s too. They’re by no means cheap at US$14,000 per square meter on average. But we’re comparing that to the most expensive city in the world.
Not all property in Macau is freehold though. Make sure to read what you’re buying very carefully before signing the contract.
Several condominium buildings stand alongside Macau’s casinos.
Better Growth Potential
There’s no stock exchange in Macau. As such, starting a business in Macau is the only way to invest there besides purchasing real estate. But you won’t have the same amount of options as you would in Hong Kong.
Gambling and tourism are Macau’s only major industries. It doesn’t have finance, manufacturing, or countless other sectors like neighboring territories. Furthermore, a small population of under one million makes catering to the city’s domestic market impractical.
Here’s the good news: Macau’s economy is starting from a lower base than Hong Kong and isn’t quite as developed. GDP per capita is lower, growth is generally higher, and tourist arrivals are still increasing by over 10% per year.
Investing in Macau gives more potential for return because of this. Just understand that most opportunities in Macau rely on the tourism and gambling sectors – whether directly or indirectly.
Furthermore, Macau and Hong Kong are about to be more connected than ever. The two cities are currently separated by 62 kilometers of water. You need to either take a helicopter or a boat to travel between them.
One of the largest bridges in the world is now under construction though. It will link Macau and Hong Kong by road, allowing you to simply drive between them. The bridge will give over 7 million people easier access to Macau when it’s finished in late-2017.
Expect to pay at least US500,000 if you want to buy property or start a company in the city. But investing in Macau might pay off if you’re an active investor, have some spare cash, and willing to deal with the lack of options.
Is your budget a bit less? You might be interested in reading about the cheapest places to buy real estate in Asia.
- Will the Korean Economy Outgrow Japan’s? - 24/09/2017
- Five Fastest Growing Countries in Asia - 21/09/2017
- Investing in Macau: An Overlooked Market in Asia - 17/09/2017
- Too Little, Too Late for Japanese Economy - 14/09/2017
- Worst Country to Invest in Asia? It’s Brunei - 10/09/2017
- Want to Buy Frontier Market Stocks? Look Here - 07/09/2017
- How Rich Chinese are Preserving Their Wealth - 03/09/2017
- How to Open a Hong Kong Brokerage Account - 31/08/2017
- You Shouldn’t Invest in China, Here’s Why - 27/08/2017
- Best Investments for a Recession: Are You Prepared? - 24/08/2017