The Hang Seng Index fell 36.78 points, or 0.17 per cent, to 21,739.39 after the auction, following gains of as much as 222 points in the morning.
However, that was not enough to attract developers.
Nicholas Brooke, chairman of Professional Property Services, said bidding was affected by the debate on green features as well as by the holding of the auction in the middle of the holiday season.
The opening bid for the first site, Tai Po Town Lot 200, was HK$3.64 billion by New World Development.
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BRENDA FOSTER, PRESIDENT OF THE AMERICAN CHAMBER OF COMMERCE IN SHANGHAI; "An Update of the Business Climate in China" to the Hong Kong China Hawaii Chamber of Commerce (HKCHcc) at the Pacific Club 2/14/2008 The froth is coming off Hong Kong's property market, with bidding at the biggest government land auction in two years failing to reach the high prices forecast by analysts.
Two residential sites on the Tai Po waterfront were sold yesterday at the low end of market expectations, a signal that developers believe property prices are close to their peak.
Average residential property prices in Hong Kong have risen 28 per cent this year, according to property benchmark Centa-City Index, raising fears of a property bubble.
Sino Land acquired both sites in the auction, one for HK.15 billion and the other for HK.25 billion.
The second site was bought jointly with K Wah International, which owns a 15 per cent stake.