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Published August 17, 2006

S'pore hotel room rates to grow strongly: UBS
Luxury residential prices expected to rise 15% this year


(SINGAPORE) Hotel room rates are likely to rise by 10 or 15 per cent a year for the next three years, says a wide ranging UBS report on the Singapore property market. The Swiss bank report goes on to predict a further 15 per cent rise this year in sale prices for high-end residential properties, following last year's 26 per cent increase.

This week's property market report attributes much of the expected growth to the effect of the forthcoming integrated resorts.

UBS says that because tourist arrivals are expected to increase by 5 to 7 per cent per annum until 2009 at a time when the number of hotel rooms is expected to increase by just 2 per cent a year the effect will be double digit growth in hotel room rates. Average hotel occupancy is already at 85 per cent.

The bank says that while average hotel room rates in Singapore have increased from $107 per room night in 2003 to $161 per room night in April this year they are still much lower than that in comparable Asian cities, notably Hong Kong.

UBS expects more foreigners to buy residential property in Singapore because of the building of the integrated resorts. It says the impact of foreign home buyers will be felt most in the luxury segment, noting that foreigners last year accounted for 58 per cent of total purchases of high-end residential units, which it defines as those priced at more than $1,100 per square foot.

The report says there is a 70 per cent chance of the Kerzner International and CapitaLand consortium winning the right to build the integrated resort (IR) at Sentosa. Of the other three bidders, it sees Genting International-Star Cruises as a particularly credible competitor.

UBS notes that among the bidders for the Sentosa IR, only Kerzner has substantial experience in building island resorts integrated with casinos and Kerzner's Atlantis in the Bahamas was cited by the Singapore government as an example of an IR where gaming revenue constituted only 26 per cent of total revenue.

UBS thinks the Sentosa IR will be more profitable than Marina Bay's, particularly in the initial years. It notes that Sentosa's land price is half that of Marina Bay and argues that development of the Sentosa IR is likely to be quicker and less expensive than Marina Bay IR, given the lower density.

UBS believes that with the government pumping $2 billion into Marina Bay infrastructure and the addition of Marina Bay Sands, Marina Bay will become the most compelling convention venue in Asia. It will have the highest concentration of convention space and hotel rooms all within walking distance.

Suntec Reit and Singapore Land are seen by UBS as beneficiaries of the transformation of Marina Bay, while Keppel Land is seen to benefit from having residential and office projects close to the IRs at Marina Bay and Sentosa.

UBS's top picks in the Singapore property sector are Suntec Reit, City Developments and The Ascott Group. It puts City Developments as being the price leader for luxury residential projects here and believes Ascott can benefit from upside potential in the Singapore hotel sector.