THE contrasting outcomes from the public auction of two residential sites yesterday reflect developer caution about the market for larger flats in the New Territories but confidence in the mass home sector in urban areas, analysts say. The disappointing sale of the 283,200 square foot residential site in Tai Po after only a single bid caught some analysts by surprise. Analysts had predicted a selling price of $520 million to $730 million for the site. The plot was almost withdrawn from sale with Henderson Land Development putting up a bid to buy it at the opening price of $500 million. The aggressive bidding and the higher-than-expected price paid for the 13,950 sq ft commercial-residential site in Shau Kei Wan, also by Henderson Land, was another surprise for the market. The site was sold, after nearly an hour of bidding, for $320 million, compared with the opening price of $220 million. It was seen as a booster to the mass residential sector in urban areas. As expected, most major developers including Sino Land, Sun Hung Kai Properties and Hang Lung Development did not join the bidding for the two sites. Smaller developers such as China-backed Guangzhou Investment and Asia Standard International showed keen interest in the Shau Kei Wan site. Analysts said this reflected a recovery of developers' confidence in the small and medium-sized residential market, especially in urban areas with good public transport. Baring Securities (Hong Kong) assistant director Nichols Pang Shuen-wai said many big developers were eyeing other sites to be auctioned later in the year such as the Tamar Basin site and the property development above the future Central station along the new airport railway. 'Many would have ignored this auction,' he said. On Henderson Land's strong bidding interest, Mr Pang said the company could develop the Shau Kei Wan site with its adjacent one and hence have lower development costs. He said developers were optimistic that in one or two years' time, prices for small and medium-sized residential units would rise. The average value paid for the Shau Kei Wan site is estimated at $2,800 per sq ft. Based on that, analysts predicted that the selling prices of the completed properties on the plot would exceed $5,000 per sq ft, which would be about 25 per cent higher than the current prices in the secondary market. Pang Shiu-kee, head of SK Pang Surveyors & Co, said the strong bidding interest in the Shau Kei Wan site was partly attributable to the limited supply of residential projects in the area. He said developers' bidding interest for the Tai Po site had been dampened by the potential large supply of residential land and large-sized housing projects in the New Territories. He expected the site's disappointing sale could put pressure on the selling price for housing projects in the area such as Richwood Park, a joint venture owned by Nan Fung Development and the Kerry Group. Seapower Securities property analyst Patrick Chia Tai-man said the price indicated developers' caution for the luxury market and their fear of an oversupply in the New Territories. Besides, demand for high-end luxury residential units in that area was not strong, he said. Some analysts said the auction results could not be considered a barometer of developers' confidence and projection for the residential market. Franklin Lam, property analyst of HG Asia, said the Shau Kei Wan site was too small to reflect developers' confidence in the mass housing market. The Tai Po site was not either a representative lot for the large-sized housing market in terms of quality or location, he said.