Tepid bidding at yesterday's government land auction was yet another sign that large developers are becoming increasingly cautious about prospects for the residential market. A site at Tseung Kwan O - one of three residential plots going under the hammer - was bought by Sun Hung Kai Properties at a lower than expected price of HK$3.12 billion, or HK$3,934 per buildable square foot. SHKP, which bought a neighbouring site with a land cost in terms of gross floor area of HK$4,628 per square foot last year, outbid three other developers including Cheung Kong (Holdings) and Nan Fung Development. 'The atmosphere was not as good as expected. There were only four bidders compared to about six to seven at auctions earlier this year,' said Vincent Cheung Kiu-cho, Cushman & Wakefield's national director for valuation and advisory services. Developers believed 'there will be many opportunities to buy land sites in future and given the market uncertainties, they are only willing to purchase a site when it is cheap'. Bidding for the Tseung Kwan O site had a slow start. After SHKP made the opening bid, Lands Department auctioneer Graham Ross warned twice he would withdraw the site if it failed to meet the reserved price. He later halved the increment for bids to HK$10 million to encourage bidding. The site was sold on the 25th bid. The plot next to Tseung Kwan O MTR station will offer a maximum gross floor space of 792,898 sq ft. The developer must build between 960 and 1,010 flats as a condition of the sale, meaning each flat would be limited to about 785 to 824 sq ft. Cheung said SHKP would find it profitable even if it sold the completed flats for as low as HK$7,000 per square foot. Victor Lai Kin-fai, the chief executive of property consultancy firm Centaline Professionals, said the selling price was lower than expected because of the restriction on flat numbers, which lowered the development flexibility. The same restriction also applies to the residential site auctioned at Tan Kwai Tsuen Road in Yuen Long, with winning bidders required to construct at least 170 flats. However, that site drew a better response, attracting eight bidders including Sino Land, Regal Group and HKR International. The auction lasted for about 47 minutes before a consortium including Regal Group and Paliburg Group placed the 162nd bid to claim the site for HK$361 million, or HK$2,997 per square foot in terms of gross floor area. The price fell within market estimates of between HK$343 million and HK$510 million. Regal executive director Donald Fan Tung said that including the land price, the company planned to invest HK$700 million in building a luxury residential project. Another site in Sai Kung was bought by a consortium formed with small developers International Group, Tai Fu Holdings and investor Simon Fung, which outbid two others to win the site for HK$121.5 million or HK$10,036 per buildable square foot. International Group's chief executive Antonio Kwong said the group planned to build five to six houses on the site for about HK$190 million.