Rising construction costs and softening property prices led developers to submit conservative offers that fell short of the government's reserve price for a luxury residential site on offer in Tai Po. The government yesterday said all seven bids for Tai Po's Pak Shek Kok site have been rejected as the offers failed to meet the reserve price. Surveyors estimate it at HK$3.57 billion to HK$5.01 billion, or HK$5,000 to HK$7,000 per square foot. The tender on Friday attracted bids from Sino Land, Cheung Kong (Holdings), Great Eagle Holdings, a consortium of Paliburg Holdings and Regal Hotels International, Wheelock Properties, Sun Hung Kai Properties and New World Development. "The government has rezoned for residential use the four sites in the area," said Alnwick Chan Chi-hing, head of valuation and professional services at property consultant Knight Frank. "These sites could now provide up to 3,000 flats. It has sold seven sites in Kau To, which is close to Pak Shek Kok and has a better view. You can see that there will be plenty of new housing supply from this area." Property prices won’t go up in future. But construction costs keep rising DONALD CHEUNG, EMPEROR Chan added: "Developers face a higher investment risk in building luxury projects in Pak Shek Kok." Emperor International Holdings executive director Donald Cheung Ping-keung said: "Property prices won't go up in future. But construction costs keep rising. That leaves developers with only two choices if they want to make a profit: we either have to cut the land cost or not buy land at all as it is impossible to cut construction costs." He said he believes the Kai Tak sites sold for better-than-expected prices as they could house small flats located in an urban area with a new development concept. The flats could thus attract a wide variety of buyers. "But the Tai Po site is used for low-density development only. Developers are less interested in luxury residential sites in New Territories [given the poor market sentiment]. That's why their offers for the Tai Po site have been conservative," he added. Chan said the government should accept the highest offer for the tender under the circumstances. "The government has to accept that land prices are falling," he added. The Tai Po site covers 204,516 square feet and could yield a total gross floor area of 715,806 sq ft. However, another small luxury residential site in Sai Kung was sold to Letrich Property for HK$160 million or HK$19,935 per square foot, 33 per cent higher than was expected.