Additional stamp duties imposed on residential sales in Macau a year ago have failed to curb demand in the former Portuguese enclave, where prices have reached record highs.
Analysts forecast flat prices could rise by a further 5 per cent by the end of this year due to strong pent-up demand and robust economic growth.
'If the extra stamp duty was aimed only at deterring speculators, that goal has been achieved, because home transactions plunged significantly,' said Jeff Wong Chi-wai, head of Macau residential property at realtor Jones Lang LaSalle.
'But if the government wanted to curb prices from growing with the extra stamp duty, I have not seen this happening. The situation is similar to that in Hong Kong where an additional stamp duty was introduced [in 2010].'
In April last year, Macau's chief executive announced a special stamp duty - which took effect on June 14 that year - to deter speculators and cool property prices.
Under the new regulation, buyers who sell homes within a year of their purchase would have to pay the special stamp duty, equivalent to 20 per cent of the sale price.
If the property is sold within two years, the additional duty would be 10 per cent. The government also introduced curbs on mortgage lending. After these measures were enacted, home sales fell significantly.
Before the measures were introduced, Macau's Statistics and Census Service said it had received property sales tax from more than 3,500 transactions of primary and secondary homes in April last year (reflecting the number of deals concluded within that month or earlier), according to Ricacorp (Macau) Properties.
By last July, the number of transactions declined to 878, and fell further to 560 in February.
Home sales have since rebounded to 1,232 deals in March this year and 1,824 in April. But agents attribute that to the release of pent-up demand following more launches of new residential projects after the Lunar New Year.
'We have never seen such a quiet secondary home market since opening our business in Macau seven years ago' said Jane Liu Zee-ka, a Ricacorp managing director. 'Sales of secondary homes have remained at a low level. There are days when we see fewer than 10 secondary flat offers at huge housing estates with more than 1,000 units, compared with a few dozen offers before.'
Liu said there were 17,176 home sales last year. The buyers, she said, would be reluctant to sell this year and face paying the penalty stamp duty, which would reduce housing supply. She also said home prices had surged since February because of the limited housing supply, strong economic growth of 18.4 per cent in the first quarter, a low jobless rate of about 2 per cent, high rental yields of 3 to 4 per cent, and strong pent-up demand from upgraders and other buyers.
Home prices have consequently risen by 12 to 15 per cent so far this year, with some exceeding the peak in April last year, rebounding from a decline of more than 10 per cent in the second half of last year.
Jacky Shek Po-tak, senior sales director at Centaline (Macau) Property Agency, said secondary homes at One Central Macau were currently selling for about HK$8,000 per sq ft - similar to price levels in April last year.
Jones Lang LaSalle's Wong said flats at Nova City in Cotai were selling for roughly HK$4,000 per sq ft, exceeding the peak of HK$3,700 per sq ft last year and in 2007.
Ricacorp's Liu and Wong expect home prices to continue growing by as much as 5 per cent in the second half of this year.
But the number of transactions may decline, as there are not as many new flat projects available for sale as there were in the first half.
'I'm still optimistic about the outlook for Macau's residential market,' Wong said. 'There is hardly any way to suppress rising home prices when Macau's economy is still growing rapidly, and instead of using administrative measures to stabilise prices, the government should increase land supply and boost new flat supply.'