One source said that the smallest flat could go for a fraction lower than HK$13,000 per sq ft. Similar properties in the area have sold for between HK$19,000 and HK$24,000 per sq ft.

The prices still have to be endorsed by the Transport and Housing Bureau before details will be announced officially at the end of the year.

Hong Kong’s leader Carrie Lam Cheng Yuet-ngor invited the statutory body to use the site for starter homes as part of a raft of measures to help more people to get on to the property ladder.

The pilot scheme is targeted at young families who have been priced out of the red-hot property market, yet are too wealthy to be eligible for the government’s existing subsidised home schemes.

Applications for the scheme are expected to open in January, and aspiring homeowners will be chosen by a lucky draw. Construction is slated for completion in the second quarter.

Sammy Po Siu-ming, the chief executive of Midland Realty’s residential division, said he believed the price would attract customers.

“Other flats in the area are going for around HK$19,000 per sq ft. At the market’s peak, they were worth even up to HK$24,000 per sq ft,” Po said.

An authority board member, who requested anonymity, said: “I think it’s a reasonable price, and I believe the project will be popular, as all URA projects have been, due to their urban location and convenient transportation.”

Money alone is no cure for Hong Kong’s housing shortage

The one downside was that the flats were a bit small.

“For young couples who are buying their first flat, it’s still acceptable,” the member said. “At least they’ll have a higher degree of freedom and independence compared to living with their parents.”

The discounts for starter homes are about 10 to 20 percentage points less than what is typically offered for subsidised government flats. The current batch of subsidised homes under the Home Ownership Scheme will be sold for HK$4,976 to HK$7,246 per square foot, or between HK$1.18 million and HK$4.7 million, depending on location.

We need to get creative to fix Hong Kong’s housing crisis

Starter-home owners will be barred from reselling them in the first five years to prevent speculators from flipping flats for profits. After the restriction period, owners can pay back a land premium to the authority to sell or rent their flats in the open market. The payable land premium is linked with market inflation and would be around 38 per cent of a property’s market price at the time of sale.

Eligible applicants must be Hong Kong residents who have never owned property. Income levels must fall between HK$28,501 and HK$37,050 for individuals, and HK$57,001 and HK$74,100 for households of two or more. Asset limits are set at HK$1.28 million and HK$2.55 million respectively.

Separately, Financial Secretary Paul Chan Mo-po said property prices had adjusted in an “orderly manner” in the past several months, and the government would continue to monitor the market movements closely.

“Although property prices have lowered recently, price levels are still out of reach for many,” Chan said in a meeting of the financial affairs panel of the Legislative Council.