The Hong Kong property market appears to be cooling down after two prime residential sites, in a northern area of the city called Tai Po, sold for only $1.34bn at auction, having been expected to achieve significantly more.

The sale of the two adjacent sites, the first major auction of Government land in two years, was expected by market observers to draw fierce competition from land hungry developers.

The result has been welcomed by analysts as it points towards a more stable market in 2010, after prices had soared by +27% in 2009 creating one of the world’s hottest property markets after a buying frenzy.

The analysts also believe that developers are being more cautious about price as they are concerned the Government might implement measures to avert a property bubble, possibly leading to a drop in property prices as Donald Tsang, Hong Kong’s Chief Executive, stated in October 2009 that the Government was watching real estate prices and would fine tune land policies if necessary