In an interview with The Standard, Tsang sought to ease public concerns that home buyers will have to pay exorbitant prices for flats, insisting land prices would be determined by the market alone and nothing else.

``There is no such thing as a high or low-land-price policy. The land prices must be determined by the market or the buyer's affordability.

``I don't care whether I face Robert Ng [of Sino Land], the Kwok brothers [of Sun Hung Kai Properties] or Li Ka-shing, this market-driven policy will persist,'' he declared.

Ho's comments had triggered widespread speculation that the government had struck a deal with developers to prop up the property market. But Tsang contended that Hong Kong has never adopted a high-land-price policy, saying that, in colonial times, the government restricted the supply to 50 hectares a year regardless of demand, resulting in high prices.

``It was never a policy. It was only a consequence of the land policy at that time. Now, the land policy will purely depend on the market,'' he said.

He said the government is incapable of influencing the property market because it only has a limited market share of the territory's land.

Despite the recent upsurge in prices of luxury flats, Tsang said the market for flats under 1,000 square feet would remain stable.

``There will not be any risk of a bubble existing in the mass property market. We should not be too obsessed with the rocketing prices of upmarket flats,'' he said.

In response to criticism that prices set for triggering land auctions under the application-list system are too high, he said Secretary for Housing, Planning and Lands Michael Suen would look into the issue and make ``proper adjustments.''

``The pricing in the application list is not accurate enough, resulting in failed bids by developers. I admit that there is room for improvement in this regard. Michael Suen will look into it,'' he said.

But Tsang insisted the present application list system is effective because the supply is based on the demand.

He also reiterated that the government is determined to resume the sale of 2,000 Home Ownership Scheme flats a year at the end of 2006, as a means of stabilizing the property market.

The sale of HOS flats ceased in 2003 and the Housing Authority had more than 16,500 unsold HOS flats, worth about HK$20 billion, on its books at the end of March.

``The government will continue to fully utilize the mainland market and promote the high-level value-added industries. This is the only way out for Hong Kong in the future,'' he said.

Tsang also dismissed the possibility that a revaluation of the yuan will have an impact on the Hong Kong dollar, saying the SAR has a competitive business environment that can withstand any challenge from other currencies.

cannix.yau@singtaonewscorp.com

carrie.chan2@singtaonewscorp.com