(Bloomberg) -- Hong Kong saw a record number of failed land tenders this year with plot-sales revenue headed toward the lowest due to the sector downturn. 

The city only sold one-third of land plots in public tenders in the first 11 months, a record for failed bids in Hong Kong, according to a Nov. 30 report from Colliers International Group Inc.

Increased costs for funding and construction are deterring property companies from acquiring land, said Hannah Jeong, head of valuation & advisory services in Hong Kong. “At the same time they don’t know whether residential prices will go up to cover the margin five years later,” she said. “That’s why developers are losing confidence at the moment.”

The six sites left unsold were mostly residential plots. The financing interest rate for developing projects is at around 8%, Jeong added. Construction costs for mass-market homes now are about HK$5,000 ($640) per square foot, which a few years ago was the pricing for luxury projects.  

Hong Kong’s land suppliers include the government, MTR Corp. — the subway operator owned by the government — and the Urban Renewal Authority, a public body responsible for city redevelopment.

The lackluster land market has hurt the government coffers. It has generated just HK$12.1 billion land revenue in the current fiscal year ending in March, making up 14% of the annual target. 

Land sales have long been a major source of income for the city to maintain a low tax system. At its peak, land sales brought the government HK$165 billion in the 2017 fiscal year.

Expensive interest rates are suppressing the city’s housing market. Residential prices have dropped to six-year low while developers are selling new apartments at a discount to lure buyers. 

Local builders’ share prices have underperformed the city’s benchmark index this year. Sun Hung Kai Properties Ltd. and Henderson Land Development Co.’s shares are down by more than 20% since the start of the year. New World Development Co. has tanked by 46%.

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