USA Subprime Woes and Macau Real Estate

I’ve only been back in the USA for about a week, but I already miss those Portuguese egg tarts. Back here in the USA, ordinary folks are still struggling to pay their re-adjusted adjustable rate mortgages, foreclosures are at an all-time high, and those who haven’t bought a house yet are finding it difficult to get approved. Macau is one of the few places left in the world where mortgage loans are continuing to expand. Property mortgages in Macau hit MOP$96.6 billion in 2007, up 48.6% from 2006. Interestingly, although the aggregate value of mortgages is going up, the actual number of mortgages has decreased, which indicates that the mortgages that are being taken out are for much higher numbers — and that there is a big demand for high-end property.

But besides residential property increasing in price, there’s still plenty of commercial development in the works too. A recent report revealed details of a plan by Shun Tak Corporation to develop the last piece of waterfront in Macau. According to reports, an email was sent out by Shun Tak’s communications department in error, and was followed immediately by a note saying that there are no plans to issue a press release after all. But, as they say, the cat’s out of the bag, and the legendary Stanley Ho’s secretive plans are no longer so secret.

The rogue email reportedly detailed plans for purchasing a tract of land adjacent to Harbor Mile. Shun Tak owns Harbor Mile and is in the middle of a major development project there. The adjacent property is worth $513 million. At this point it’s all speculation, but with both Harbor Mile and the adjacent 1.6 million square foot site, Shun Tak would have a formidable piece of land indeed.

It’s also interesting that Ho is still trying to raise money through an IPO of his Sociedade de Jogos de Macau Holdings company, and according to the latest Reuters report, he has scaled back plans to raise a billion dollars — and is targeting between $500 and $600 million — just about enough money to buy the Harbor Mile-adjacent property.