While some Macau developers feel there is little to worry about, others have raised quality levels to match their rivals.

Leading developer San You Development was one of the first to adopt this strategy for its upmarket residential project Kingsville on Taipa.

Instead of the usual two-metre-wide public corridors, Kingsville's were 2.4 metres wide, said San You chief executive Timothy Cheong Lok-tin. The ceiling height of the apartments was 2.9 metres, compared to the usual 2.7 metres, and the development had a clubhouse, another unusual facility in Macau.

San You, which has another upscale project called Greenville, is attracting interest from Hong Kong and foreign buyers.

'More than 50 per cent of our buyers are either Hong Kong residents or expatriates,' Mr Cheong said, adding that expatriate buyers look for quality and comfort and had not found much in that calibre so far in Macau.

Ung Choi-kun, a Macau legislator and managing director of real estate and auction company Kun Cheong Holdings, said that, ultimately, the developers who did well in Macau would be those who provided quality units.

'We have not heard about Sun Hung Kai Properties or Cheung Kong (Holdings) coming in as developers, so I think that the key now is to elevate our own quality,' he said.

Hong Kong developers usually target the top end of the market - luxury residences or serviced apartments - while Macau developers target the mid-range.

The arrival of developers from Hong Kong has broadened the appeal of property in Macau, attracting more potential buyers to the market.

Mr Ung said: 'Demand is going up and prices are going up. As developers, we welcome that.'

However, Mr Cheong said that rising prices in the market were not necessarily favourable for developers because San You Development did not have that much of a land bank.

'We are like bakers. If there is high demand for bread, the price of flour and other ingredients goes up too, so in the end making bread starts to cost more,' Mr Cheong said.

Mr Ung said he was not concerned about the survival of local developers given the challenge from overseas players.

'The real estate sector only started to really recover a year ago. There is plenty of breathing space for everyone,' Mr Ung said, adding there was an upside to the new competition.

Jimmy Yeung Long-ming, Macau-based sales director for Midland Realty, believed Hong Kong and foreign developers would need to co-operate with local developers because land was scarce in Macau.

'More than half of all land in Macau belongs to the government, so privately owned land is scarce in the first place,' Mr Yeung said.

'The majority of this privately owned land is already held by local developers.'

When Henderson Land Development proposed a $4 billion residential-retail-hotel complex in the Taipa Island reclamation area, it bought the land from local developer Man Kan Property, Mr Yeung said.

He said that because casino magnate Stanley Ho Hung-sun owned land in Macau, his Hong Kong-listed flagship vehicle Shun Tak Holdings was in a unique position to work with outside developers.

This was why Hongkong Land announced that it and Shun Tak would jointly develop a $6 billion residential-retail-hotel project near the Macau Tower in Nam Van.

Meanwhile, Hopewell Holdings and Shun Tak are building the $680 million Nova Taipa Gardens in Taipa.

Mr Yeung predicted that there would be more joint ventures between Hong Kong and Macau developers.

'The local firms need a larger capital pool to develop their land, while their Hong Kong counterparts need the land and the local connections,' he said.