The short-term outlook for Macau's residential market will remain cloudy in the second half due to policy changes and uncertainties globally, property consultants said. However, once these uncertainties were out of the way confidence in the medium-term outlook would return among buyers, they added, because of the strong economic growth in the former Portuguese enclave, underpinned by a booming tourist sector, surging gambling revenues, and a low interest-rate environment. The residential market was strong in the first quarter, supported by investment demand driven by low interest rates and the attraction of rising asset prices as a result of accelerating inflation, consultants said. Growth faltered in the second quarter after the government announced a limit on gaming licences and tables, according to property consultant Jones Lang LaSalle. Overall, between January and May, property transactions fell 34.3 per cent year on year to 7,673, but Jones Lang LaSalle believed the final outcome for the first half would improve on the same period last year. Meanwhile, capital values for high-end residential properties rose 10.9 per cent in the first half while rentals saw 7.7 per cent growth on increased leasing demand from expatriates and a tight level of supply. Jeff Wong, Jones Lang LaSalle's head of Macau residential, said capital values for high-end residential properties might experience a short-term consolidation due to doubts about the global economy and the impact from the government's intention to moderate the growth of the casino industry. However, he expected the lease market to continue to perform and rents would likely remain on the rise because of a continuous influx of expatriates and limited supply. 'The outlook for the sales market will remain cloudy for the remainder of the year, owing to the credit tightening and uncertainties in the global market. However, the deepening of negative real mortgage rates together with rising incomes will offset some of the pain,' Mr Wong said. For the mass residential market, Rico Kwok Chiu-lung, the managing director for Centaline (Macau), said growth in transaction volume and prices was strong in the first quarter but fell 40 per cent in the second quarter. Prices were 5 per cent to 10 per cent down. Mr Kwok forecast the mass residential would be 'quiet' in the third quarter with transaction volumes likely to be at the same levels as the second quarter. However, prices could come under further downward pressure, he added, largely because of the poor investment sentiment under the subprime crisis in the United States and the surging price of oil. The Guangdong government's restrictions on individual travellers could further limit the number of mainlanders visiting Macau and hurt the market, he said. Housing prices could drop another 5 to 10 per cent in the third quarter although the market would get a boost when investors returned. Mr Kwok expects transaction volumes this year to fall 30 per cent on last year, and housing prices in the mass residential sector will drop about 10 per cent.