Macau is fast overtaking its rival Hong Kong as the fastest-growing area for residential hotel and retail property prices.

One of the largest projects is the US$2.1 billion City of Dreams being built by Leighton Asia, China State and John Holland, on behalf of the Melco PBL development company – owned by Lawrence Ho’s Melco gambling company and James Packer’s Crown group.

After a slow start, work on the project got a serious kick along after Mr Packer and Mr Ho signed up Wal King’s Leighton Holdings to take on the construction.

But that is just one of many projects on the small island, a 50-minute ferry trip from Hong Kong. Housing prices on Macau are going through the roof, spurred by the huge inflow of cash from gambling revenue and hotel room sales.

Roger Barnett, the project director for City of Dreams, said Macau used to be a sleepy town which people visited on the weekend or if they wanted a night out at a casino.

“But now that has completely changed. It is like Las Vegas on steroids. It is absolutely booming,” Mr Barnett said.

The latest report on Macau from Colliers International shows the openings of the Venetian Macau, MGM Grand Macau, Grand Lisboa and Crown Macau last year strengthened the island’s position as a world-class tourist destination.

There were 27 million visitors by the end of last year, which was a year-on-year growth rate of 22.8 per cent. The rising number of visitors as well as increased spending by residents drove retail sales up 33.2 per cent last year and there was a 9.4 per cent year-on-year growth for private consumption expenditure in last year’s third quarter.

There were 28 casinos in Macau by the end of last year.

The report said sustained low interest rates of about 3 per cent and accelerating inflation, together with strong economic fundamentals, would help trigger stronger demand for residential properties.

“In addition, the proposed plan of the first home buyers loan scheme will add extra impetus to the sales market,” the report said.

And on the all-important hotel sector, the report showed that average hotel occupancy rate was 83 per cent, despite the number of hotel rooms expanding by 24.4 per cent year-on-year to more than 16,000 to the end of December.

“The continuous arrival of new resorts and ongoing development of meetings, incentive tours, conventions and exhibitions industries remain the key factors for a positive outlook.”

Hotel projects in the pipeline include the first stage of Ponte 16, which started operations last month, with 420 rooms in the 20-storey hotel and a 25,000 square metre casino.

There are also four hotel-casino developments scheduled to open this year: the Four Seasons, Sheraton Macau, Shangri-La and the Traders.

“Macau enjoyed almost 30 per cent growth in 2007 as a gaming and entertainment hub,” the Colliers report said. “Gaming revenue increased by 45.7 per cent year on year to more than 24.9 million pataca [$3.43 million] in the fourth quarter 2007, fetching a total of 83.8 billion pataca in 2007.”

Thanks to all that cash rolling in, the average residential price edged up over 20 per cent, with almost 20,000 transactions. Colliers said the residential projects coming on line included Harbour Mile by Sun Tak Property comprising seven towers – five for residential, one for office and retail and one for serviced apartments – due for completion by 2010.

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