Analysts agreed that the record-breaking purchase represented a considerable vote of confidence in the colony's property market just three months ahead of the return to Chinese sovereignty.
"Developers have a very robust confidence in the outlook for the residential market," said Michael Green a director at Salomon Brothers and long-time property specialist in Hong Kong.
The sale was made at a government land auction for an unusually large 275,472 sq ft site at the eastern tip of Hong Kong island, which is neither fashionable nor known as a location for middle-class residence.
Nevertheless Sino Land, a locally listed property developer, left other bidders staring in amazement as it scooped up the site for an equivalent price of almost pounds 440 per square foot.
Yesterday's sale is not an isolated example of bullish sentiment in the property market. In the residential market alone prices rose by an average of 30 per cent last year. This mirrored the rise in share prices, which is hardly surprising because property values account for the bulk of assets held by quoted companies and underpin the entire stock market.
Although the commercial property market is less buoyant than the residential market, a survey by locally based CY Leung & Co shows that Hong Kong ranks as second only to Tokyo in terms of costs for setting up offices. In Tokyo the average cost last year was $100 per square foot per month; in Hong Kong the average is $80.
Last year the Peking-controlled Citic Pacific set another record by paying HK$3.35bn to buy reclaimed land near the centre of town to build an office tower.
Construction of the new building is at an advanced stage and letting has already begun. The developers are expected to make a good return despite the fact that yields on office properties are declining.
The property market has shrugged off uncertainties about the return to Chinese rule to such an extent that the government has set up yet another task force to examine ways of eliminating property speculation.
Large queues form outside the doors of property developers launching new apartments and money can be made by simply selling the right to buy units in new developments.
Nevertheless most analysts predict that price rises in the current year will not match those of the past year. The Hang Seng Bank, a unit of HSBC Holdings, expects mid-range residential prices to rise by no more than 15 per cent.
The main uncertainty is not political factors but interest rate movements. Yesterday's sale came ahead of an anticipated rise in US interest rates which is likely to be followed by a rate rise in Hong Kong, where the local currency is tied to the greenback at a fixed rate.Reuse content