Buoyed by the robust result, shares of property agency Midland Holdings gained 6.2%, while Hong Kong's Hang Seng property subindex rose 1.8%, outperforming a 0.6% rise in the broader Hang Seng Index.

"Although the site has a lot of good qualities and it's such a rarity, the response was still a surprise to us," said Alvin Lam, director of Midland Surveyors. "This also shows that developers are confident towards Hong Kong's property market down the road despite government's recent policies, and will support market sentiment."

James Cheung, director of Centaline Surveyors Ltd., pointed to Tuesday's auction as evidence that Hong Kong's developers are focusing on well-situated sites that can be turned into luxury developments.

Mr. Cheung said the result likely will bump up property prices and sales in Hong Kong's urban areas, which had been tapering off in recent weeks after the weak responses at the previous auctions.

Developers were largely seen to be holding back at those auctions, for mass-market residential developments, in order to bid more aggressively at Tuesday's auction, as well as another auction next month for a site in Hong Kong's exclusive Peak district. In the case of both auctions, the Hong Kong government initiated the land sale—part of an explicit policy to increase land supply after a 29% rise in home prices last year.

Earlier, developers had repeatedly tried and failed to trigger auctions for the prime sites. Under the current system, a land auction is triggered when a developer offers at least 80% of the government's minimum price for a lot on the list. The government doesn't divulge what the minimum prices are.

By JOYCE LI