Developers expecting to bet upwards of $10 billion on the future of local housing prices today will be hoping their gamble pays off despite wavering public confidence in the property market, higher interest rates and lax demand for mortgages. The result of the first government land sale in more than a year will not only reflect the state of the economic recovery but test homebuyers' appetite and affordability, experts say. 'If the auction results are good, it will be an indication that the economic recovery is proceeding quite well,' said Francis Lui Ting-ming, economics professor at the Hong Kong University of Science and Technology. 'However, property developers have misfired many times before and been wrong about their price predictions. They are just guessing, too,' he said. According to Midland Realty chief analyst Buggle Lau Ka-fai, the residential market turned quiet after last October's record-breaking auction because buyers and sellers failed to compromise on prices. He said homebuyers were inclined to borrow less as interest rates rose. Hong Kong Monetary Authority data for new home loans in August shows a 21.5 per cent drop to $8.6 billion from July, the third straight month of declines. Likewise, Polytechnic University's quarterly indicator of public confidence in the housing market dipped marginally in September to 704 out of 1,000 from a June peak of 708. The index has been rising since March 2004, when it was 556, just above the halfway mark between optimism and negative sentiment. The survey of 1,029 respondents found that the current cycle of interest rate increases had deterred some potential homebuyers and investors from making purchases. 'But most of the respondents are still optimistic about the property market,' said the university's head of building and real estate, Francis Wong Kwan-wah. He expects the government to reap about $10 billion from the sale. Property consultants generally expect the three sites to fetch between $7.4 billion and $8.4 billion, with more optimistic forecasts pointing to $10 billion. Prudential Surveyors said the 66,478 sq ft site at the junction of Hoi Wang Road and Hoi Ting Road, near Olympic Station in Tai Kok Tsui, would be worth $2.24 billion. An adjacent plot covering 79,621 sq ft could go for $2.69 billion while the Ngau Chi Wan site could go for $2.88 billion.