The price was slightly higher than market expectations and will inevitably help boost confidence in a housing market which has been struggling to recover from recession.

Medium-size developer Hon Kwok Land Investment beat off the challenge of three rivals to secure the second site on auction. It offered $95 million for a 6,157 sq ft commercial-residential site in Wo Tik Street, Tsuen Wan.

Government Land agent Herbert Leung Yuk-she, who conducted yesterday's auction, said the effect of the land sale on investors would be positive, providing them with an indication that the property market had found renewed support.

'However, those two sites are very small; it may not be an indicator of the overall situation in the real-estate market,' Mr Leung said.

The first of the two sites offered was attractive to developers because of the scarcity of vacant land on The Peak, he said.

Small and medium-sized developers in the territory, including Lucky Man Properties and Lippo group's property arm Hong Kong China, competed in the bidding.

Robert Kuok's Kerry Properties and Kilberg were the only two buyers left battling it out for the site after the bidding passed the $100 million mark.

Kerry dropped out when the bid price reached $106 million, leaving Kilberg to finish off bidding at $1 million more.

Kilberg, which has property investments in the territory, said it bought the site for its own use.

The accommodation value of The Peak site, which has a potential gross floor area of 13,380 sq ft, is about $7,997 per square foot.

According to Franky Wong, valuation director with property consultants C.Y. Leung & Co, the last sale of Crown land on The Peak was held in 1992 when a 24,100 sq ft residential site at Severn Road was sold at an accommodation value of about $3,329 per square foot.

Michael Clarke, director of Colliers Jardine's professional services division, said the land sales indicated developers' increasing confidence in the property market.

The keen competition for the Tsuen Wan site also indicated developers were optimistic about the potential for the mass housing market, he said.

The site attracted bidding from several medium-sized developers, including Paliburg Development, Lai Sun Development and mainland-backed Punfet Holding Co.

Herman Fung Man-hei, managing director of Hon Kwok Land, which triumphed in the bidding, said the company would spend an extra $40 million to construct the building, taking total development cost to $135 million.

'The market has bottomed out. It is time to lift our land bank,' Mr Fung said.

With a potential gross floor area of 36,107 sq ft, the accommodation value of the Tsuen Wan site is about $2,631 per sq ft.