The View | Macau’s property market has taken a hard knock, but the dice are loaded in the city’s favour long-term

China’s tough line on vice and its zero-Covid approach have hurt Macau’s gaming industry over the past several years and its real estate markets more recently

However, in the long run, Beijing will still prefer a more tightly controlled gambling market on the mainland’s doorstep to a free-for-all across China

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An aerial view of Macau in 2019. Although Macau’s gaming revenues dipped below Las Vegas’ this year, they need only stabilise at a much lower level than the US$36 billion achieved in 2019 for Macau to reclaim the crown as the world’s biggest gambling hub. Photo: Xinhua

Published: 4:00pm, 12 Sep 2022

Real estate markets the world over are bearing the brunt of the fallout from the end of the era of cheap money. Being among the sectors most sensitive to the rise in interest rates, property markets are at the sharp end of central banks’ aggressive measures to bring inflation under control.

Yet, monetary policy is just one of several headwinds blowing against the industry. Other policy-induced pressures include countries’ commitments to tackle climate change and a range of measures aimed at deterring speculation in overheated housing markets.

However, when it comes to the adverse impact of policy responses on the real estate industry, no other market has suffered more than Macau. Having long been the world’s biggest gambling hub by revenue – its casinos usually account for 80 per cent of government income and a third of local employment – the city has had the rug pulled out from under it over the past several years.

China’s puritanical views on vice and its zero-tolerance approach to the Covid-19 virus have caused a regulatory and economic hurricane that has devastated Macau’s gaming industry. Beijing’s crackdown on the city’s junket business – the middlemen who lure high rollers from the mainland – has decimated the VIP segment of the market, which accounted for more than half of gross gaming revenues in 2018, data from Moody’s Investors Service shows.

For an indication of the extent to which the gambling mecca has suffered, Macau’s gaming revenues in the first five months of this year dipped below those of Las Vegas, having been almost six times higher in 2019, data from Bloomberg shows.

MGM Macau casino resort is closed on July 11, and streets are empty as Macau fights its worst coronavirus outbreak since the start of the pandemic. Photo: AP

Macau’s property market has been hit particularly hard, especially given the city’s heavy reliance on China for the majority of its visitors. Macau’s worst-ever Covid outbreak in June – which triggered an unprecedented citywide lockdown and a six-week border closure with the mainland – has dealt a hammer blow to demand.