Developers mark up flats after Kowloon sites exceed forecasts, but government rules out bubble Property prices look set to boom following the better-than-expected results of yesterday's land auction. Hours after the government reaped $10.15 billion for three residential sites, two developers announced plans to increase prices at their new estates. The sales also breathed immediate life into the second-hand market, as owners of nearby flats raised their asking prices by more than 10 per cent. Henderson Land general manager Tony Tse Wai-chuen said last night the company would raise prices at all its new developments, but he did not reveal by how much. A Wharf spokesman said prices at its Bellagio project in Sham Tseng would be lifted by at least 5 to 8 per cent. The price rises come after developers shrugged off rising interest rates to mount an intense bidding war at the government's first land auction for the financial year. With up to eight developers bidding, prices surged as much as 70 per cent from the opening bids and exceeded market expectations of $8.4 billion to $10 billion. Developers and analysts said the prices paid for the land - two adjacent sites on the West Kowloon reclamation and one at Ngau Chi Wan in East Kowloon - showed confidence Hong Kong's property market would continue to grow. The government said it was happy with the result but dismissed fears of a new property bubble. Analysts said flats on the sites, which all sold at an accommodation value of just under $5,500 per square foot, should fetch around $8,000 per sq ft. But a Sino Land-led joint venture, which grabbed the two West Kowloon sites, said it planned a luxury development that would sell for $15,000 per sq ft. The consortium paid a total of $5.92 billion for the two sites - about 64 per cent above the opening bids. Sun Hung Kai Properties, the city's biggest developer, paid $4.23 billion for the Ngau Chi Wan site - nearly 70 per cent above the opening bid, beating seven other bidders. Despite exceeding analysts' estimates, Sino Land chairman Robert Ng Chee-siong described the prices paid as very reasonable. 'It's a reflection of the confident outlook of the local property market,' he said after the auction. The Sino-led consortium knocked out at least six other parties to buy a site at Hoi Ting Road near Olympic Station in Tai Kok Tsui for $3.19 billion, and $2.73 billion for an adjacent site at the junction of Hoi Wang Road and Hoi Ting Road. The prices were both well above top-end market estimates of $2.8 billion and $2.4 billion respectively. Mr Ng said the consortium would combine the two sites and spend $9 billion to $10 billion to build a luxury residential and retail development to be completed in 2008. He expected the project to be priced at about $15,000 per sq ft - in line with other luxury developments at Kowloon Station. Sino Land owns 50 per cent of the venture, with the rest equally shared by Chinese Estates Holdings and Nan Fung Development. UBS property analyst Franklin Lam Fan-keung said the hefty transaction prices would create 'a pretty big technical hurdle' for other land auctions. 'If the government uses the land prices [as a benchmark] to decide the minimum bid for the land auction next time, those prices may be way too high,' he said. Assistant director of lands Alexander Paton said the prices 'reflected what the developers think the market is going to achieve in the future. I don't think we are in any stages of a bubble at all'. Sunny So Hok-lun, of Ricacorp Properties, said turnover in the secondary market had dropped 50 per cent in August as owners waited for the auction results, but many had immediately raised their asking prices by more than 10 per cent.