Tycoon Victor Li’s CK Asset Holdings Ltd won the site designated for residential and commercial use in Kai Tak, the former airport area, for HK$8.7 billion (US$1.1 billion), the government said late Wednesday. The bid translates to HK$6,138 per square foot, the lowest since 2014, according to Midland Holdings Ltd.

On top of high construction costs, “investment sentiment in recent months has made developers more cautious in bidding”, said Alvin Lam, a director at the surveyor unit of Midland. Lam previously valued the property at HK$14.9 billion, more than 70% higher than the transaction price.

Kai Tak — once the city’s only commercial airport for much of the 20th century — has been the hottest new development area in the past decade. Builders, especially those from the mainland including HNA Group Co, made headlines just a few years ago for splurging on land at record-breaking prices.

Interest-rate hikes and diminished demand are weighing on Hong Kong’s property market, with home prices dropping more than 14% this year. The slump is also hurting the finances of the city’s government, which relies on land sales for a significant amount of its revenue.

In the 2019-2020 year, Hong Kong raked HK$141.7 billion from land sales, accounting for 24% of total revenue. But it has generated just HK$24.6 billion during this financial year, which ends in March.

Hong Kong may report a financial deficit almost double the budget estimate due to a sluggish economy and higher government spending during the pandemic, the city’s financial secretary has said.

CK Asset plans to build small and medium-sized apartments atop the plot, which yields a maximum of about 1.4 million square feet of floor area.