The Hong Kong government will only sell one plot of residential land in the final three months of the current financial year, tightening its land-release programme to balance the number of available homes and demand in the world’s most expensive residential property market.

Only one residential site in Tsuen Wan will be put up for tender in the January to March period, which will provide around 490 flats, Secretary for Development Bernadette Linn Hon-ho said on Friday.

The government will also offer a rare, large commercial site at the junction of Sai Yee Street and Argyle Street in Mong Kok, capable of providing around 141,600 square metres of gross floor area.

The government will not be constrained by the prevailing economic situation or be concerned about land sales unable to fetch high land premium, Linn said. “We want to achieve a certain policy objective, whether we can fetch a high land premium is not the determining factor.”

The land sales plan comes after home prices dropped by the most in 14 years in November and look likely to fall again in December in what would be the longest series of monthly declines since the 2003 severe acute respiratory syndrome epidemic. In the first 11 months of this year, the official home price index has fallen 13.8 per cent. From a peak of 398.1 in September last year, the index is down 14.75 per cent.

For the Mong Kok commercial parcel, the government said it would require the developer to provide social and infrastructure facilities such as a community home, a public transport interchange, cross-border coach bus stop and public car parking spaces.

Linn dismissed concerns about the low price achieved for the recent Kai Tak sale, which was about 20 per cent lower than the market valuation. The bid “reasonably reflected the market price” and was above the reserve price set by professional government valuers considering the economic conditions, she said.

Revenue from the land sale programme, premium from lease modification among others in the current financial year is likely to reach about HK$120 billion, 15 per cent lower than the takings last year, according to the government’s budget in February.

Property consultants Knight Frank have put the valuation of the Tsuen Wan parcel at between HK$1.1 billion (US$141 million) and HK$1.4 billion, while the Mong Kok commercial parcel is valued between HK$10 billion and HK$12 billion.

The valuations for the plots have been reduced by 5 to 20 per cent after taking into account the result of the Kai Tak tender sale and the prevailing market sentiment, it added.

“The results of the recent land sales have not been very satisfactory,” said Cyrus Fong, head of valuation and advisory at Knight Frank, noting the government’s conservative stance in releasing only one residential site in Tsuen Wan.

This was also evident in last week’s tender announcement. CK Asset agreed to pay HK$8.7 billion for a plot on top of Sung Wong Toi MTR station. The price translates to HK$6,138 per square foot – the lowest for a residential parcel in the area in eight years and almost 25 per cent below market expectations.

Meanwhile, the total private housing land supply in the fourth quarter will support the development of around 3,120 flats. Together with the supply from the first three quarters, it is expected to support some 16,070 flats in the 12 months to March, exceeding the annual target by 25 per cent.