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Abstract
This paper investigates a contemporary issue of housing affordability in Macau. A theoretical general-equilibrium model substantiates that government policies influence the house price and quantity differently in different scenarios. Data of earnings by industry and occupation are employed to disclose the variation of affordability among different groups over the past seven years. The year of 2004 was the golden age of homeownership. In 2011, the situation deteriorated and the market price cast huge pressure on home buyers. Unaffordable house prices coexist with many vacant units. Facing such a market failure, people of Macau continuously request government intervention. The core of curbing soaring house prices is to reduce profits in house flipping. Policy suggestions mainly fall into aspects of taxation and regulations of financial assistance for mortgage.
Notes
1. Data are from Macau Statistics and Census Service (DSEC).
2. According to the law, No. 6/2011, a transaction of residential properties within two years after purchase is obliged to pay the special stamp duty. The tax rate is 20% if the transaction occurs within the first year and the levy is reduced to 10% in the second year.
3. The range of the long-termed income elasticity of housing demand was concluded to be 1.1–1.4 for European housing markets.
4. Data are from DSEC.
5. Data are from Population Census 2001 and 2011, DSEC. Since the census is only conducted in every 10 years, data of 2004 are not available. The percentages of other situations, including employer-provided and rent-free units, are similar over the past decade.
6. The figures are based on the advertisements of the rental market. The exchange rate between US and Macau currencies is approximately MOP$8 = US$1.
7. From 2004 to 2011, the land area has grown by 2.4 km2.
8. Data are from Macao in Figures, DSEC, and Census and Statistics Department, Hong Kong.
9. Data are from DSEC.
10. China and Hong Kong, respectively, accounted for 58% and 27% of Macau’s tourists in 2011.