Chinachem's winning tender of HK$3 billion translates into an accommodation value of HK$3,653 per square foot, the lowest in the area in more than three years.
About 4,000 flats in Tseung Kwan O are available for sale, Centaline Hong Kong propertyAgency said.
Ken Lee Yuk-cheung, a sales director at the firm, said about 100 flat owners cut their asking price by 1 to 2 per cent after the tender result was released and that around 20 cut their asking price by more than 2 per cent.
"But the news was not so daunting as to make a majority of flat owners cut their asking prices," he said.
Eric Yuen Chi-fung, the head of research at Guoco Capital, said the bidding reflected developers' expectations for Hong Kong property rices three to four years down the road. "They believe Hong Kong property rices have downward potential, and so that's why their offers were conservative," Yuen said.
"Chinachem is a private company and is under no pressure to publicly report its profit. Its offer was the highest of the developers. The others must hold a more negative outlook."
Yuen said he believed developers were pessimistic because interest rates may rise as the US Federal Reserve moves closer to reducing its stimulus programme.
"Development costs will increase if interest rates rise," he said. "As construction costs continue to rise and housing supply increases significantly, developers have turned conservative when acquiring land."
Yuen said he expected Hong Kong property rices to drop, adding that how far they fall depended on the performance of financial markets. "It seems the government hopes Hong Kong propertyprices will fall 20 per cent," he added.
Charles Chan Chiu-kwok, the managing director of consultancy Savills, said he expected prices to drop 10 per cent to 15 per cent in the second half.
"Hong Kong property prices face downward pressure, as Hong Kong property ales have stayed at a low level," he said. "Flat owners will have to cut their asking prices to lure buyers, and prices of new homes will be affected by an increase in supply."
Lee Wee Liat, the head of Hong Kong property esearch at BNP Paribas Securities, said mass residential prices would be flat or rise by as much as 5 per cent.
"Developers submitted conservative offers for the Tseung Kwan O site because there will be plenty of new supply in the area," Lee said. "Demand for mass residential remains strong, and rental yields are still higher than mortgage rates, but the outlook for high-end residential flats is not positive."
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