SINO Land Co, K. Wah International Holdings Ltd and Nan Fung Development Ltd, three of Hong Kong's largest builders, paid HK$5.71 billion (US$737 million), more than twice the opening bid, for residential building land in the city.
The 6,403 square-meter site in the Aberdeen district on Hong Kong Island was expected to sell for HK$3.95 billion at yesterday's government land auction in the city, according to the average estimate from six analysts surveyed by Bloomberg News. Bidding for the site started at HK$2.5 billion.
Property prices in Hong Kong, one of the world's most expensive cities for luxury homes, are set to rise further as record stock prices and a four-year economic expansion boost buying power.
Chinese mainland businessmen looking across the border for property investments are also feeding demand.
"Developers still have confidence in the outlook for the property market," Kenny Tang, a director of Tung Tai Securities Co in Hong Kong, said after the sale.
"The price was higher than expected because the land will be used for building luxury homes."
Sino and K. Wah will each have 35 percent stakes in the project and Nan Fung will have 30 percent, K. Wah Chairman Lui Che Woo told reporters at the auction.
He said the price wasn't expensive, given the location of the land.
Estimates from analysts for the block ranged from HK$3.5 billion to HK$4.4 billion.
"With the exception of the Peak and small action in Lantau this is the highest premium we have seen in several years," Cazenove Asia Ltd wrote in a note to clients. "Land auctions are infrequent and are therefore usually a meaningful gauge of developer sentiment."
The auction was particularly important because the Aberdeen site was the first land to be sold by the government on the southern part of Hong Kong Island in several years, the investment bank said.
Hong Kong's government is one of the city's largest suppliers of vacant land for building.