A site for non-industrial use near the city's international airport went under the hammer for 3.42 billion Hong Kong dollars (439.5 million US) on Tuesday, far below a 4.63 billion dollar average forecast of analysts polled by Dow Jones Newswires.

The 282,017-square foot (26,200 square-metre) plot was sold to unlisted developer Nan Fung Group, one of only two bidders, after the auctioneer threatened to cancel the sale if the government's reserve price was not met.

In recent months, government officials have taken a high-profile stance in reining in soaring residential property prices after they jumped nearly 30 percent in 2009.

Financial Secretary John Tsang said the lukewarm result was a sign the market was starting to stabilise, after luxury flat prices recently climbed to the boom levels of 1997 driven by deep-pocketed mainland buyers.

"The result of the auction has reflected the market situation. We have always hoped the property market will develop in a stable manner," he told reporters.

He pledged to continue to increase land supply in the coming months, repeating a promise he made in his February budget speech aimed at preventing a bubble.

"We will have land sales in June and July. The sales will keep coming."

Analysts said developers stayed on the sidelines at Tuesday's auction due to uncertainty about the full impact of the government's cooling measures.

"The impact can be especially strong on the small and medium residential flats, in light of the calls for the government to resume the construction of" subsidised housing, Charles Chan, managing director and valuation expert at Savills in Hong Kong, told AFP.

Macquarie said that the poor response would weaken sentiment in the residential market in the near term, but predicted more active bidding at future sales because of a general land shortage and the greater attractiveness of the sites in question.

"Developers will likely remain active to replenish land but they might be more picky in light of more choices available," it said in a report.

Apart from increasing land supply, the government has also hiked stamp duty for luxury flats to try to curb speculation and pledged to avoid excessive mortgage lending.

earlier related report
Gold hits record high in Asian trade
Hong Kong (AFP) May 12, 2010 - Gold hit a record high of 1,235.50 US dollars an ounce in Hong Kong Wednesday, as investors sought a safe haven over deepening concerns about the eurozone debt crisis.

It had opened at 1,229.00, just up from a previous record of 1,226.56 dollars set on December 3 last year, before finally settling at 1,233.00 dollars.

Analysts said the commodity was likely to maintain its safe haven role while other markets remained vulnerable.

"The response of the central banks and the IMF to the southern European mess is almost guaranteed to ensure continued volatility in world markets," said Capital Spreads analyst Simon Denham.

Investors had on Monday welcomed the European Union and International Monetary Fund aid package worth 750 billion euros (one trillion dollars) to resolve the debt and budget deficit crisis in Europe.

However, the euphoria faded on Tuesday amid resurgent doubts over countries' ability to reduce their deficits.

The euro continued to be sold as investors became more risk averse. The single currency was trading at 1.2624 US dollars at 0450 GMT.

IMF head Dominique Strauss-Kahn has hailed the trillion-dollar aid package as a big step forward.

However, higher gold prices indicated that traders remain sceptical over the deal, according to analysts.

"Investors are removing funds from risky assets into safer haven plays and this is positive for both the US dollar and gold," said City Index analyst Joshua Raymond.

"The EU rescue package has been widely interpreted as not a long term solution to the deficit woes within the eurozone.

"With the near term outlook remaining unstable, investors have sought to transfer their cash into defensive assets."

The precious metal, whose two main drivers are jewellery and investment buyers, hit record highs last year on the back of inflationary fears and increasing moves by central banks to diversify assets away from the dollar.

Heightened concerns about Greece have attracted fresh inflows of cash into gold.

"This resilient performance... is perhaps telling of the scepticism markets still have over the execution of the plans and the tough fiscal challenges that will face some euro area economies," added Barclays Capital analyst Yingxi Yu.

"While markets remain jittery over the effectiveness of the plans, gold is likely to perform relatively well."

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