Sun Hung Kai Properties outbid Nan Fung Group yesterday to take a luxury plot at Peak Pavilions for a record HK$1.8 billion, but not before a little drama was played out.

Only Sun Hung Kai and Nan Fung were left from among the nine bidders when the price climbed over HK$1.7 billion at the Hong Kong Cultural Centre in Tsim Sha Tsui.

The atmosphere was tense, with all eyes focused on Sun Hung Kai and Nan Fung representatives. Sun Hung Kai raised its bid to HK$1.8 billion. The auctioneer gave the final call. The deal was all but settled.

But as the hammer came down, a Nan Fung representative was seen raising his hand. Alas, he was a fraction of a second too late.

The auction started with nine bidders, including giants such as Cheung Kong (Holdings), New World Development and Henderson Land Development.

The 7,353-square-metre residential plot at 12 Mt Kellett Road has a minimum gross floor area (GFA) of 2,378 square metres, and developers seemed more than keen to get it because plots have been in short supply on the Peak for the past six years.

The auction for the former civil servants' housing block was triggered by middle-sized developer Manhattan Garment (International) last month for a record price of HK$18,000 per square feet.

But the amount Sun Hung Kai paid was beyond all market expectations. Since its GFA is 2,378 square metres, the price is as high as HK$42,196 per square feet, 129 per cent more than the previous record of HK$18,357.

Also, the amount is a record 130 per cent more than the HK$768-million trigger price.

A spokesperson for Sun Hung Kai said the final price was "reasonable".

"We will develop the project alone. For sure, we will raise the prices of our projects in the adjoining area."

K. Wah Real Estates Managing Director Alexander Lui, however, said the price was higher than his expectation. He will now consider raising the prices of his company's flats.

A New World Development spokesman, too, said his company would raise its prices.

If the prices rise at this rate, the luxury property market will outperform itself, Cheung Kong (Holdings) Managing Director Victor Li Tzar-kuoi said.

Assistant Director of Lands Chris Mills felt Sun Hung Kai paid the top-end range price, which the government had expected.

Responding to developers' plea to resume regular land auctions, Mills said the existing system was running satisfactorily. "One-third of the applications received in the past four to five months had successfully triggered an auction... we don't see any problem with the system."

Centaline Surveyors Senior Associate Director James Cheung expects the Peak Pavilion flats to cost as much as HK$50,000 per square feet. "It's hard to say at this stage whether it's too high for market to afford, but the price of luxury property is expected to rise 10 per cent next year."