Financial Secretary John Tsang also announced a set of measures aimed at easing the burden of soaring prices in the city, including energy and rent subsidies, as he warned that inflation would surge this year.

The decision to sell off more land is the latest by officials in the city of seven million, famous for its sky-high residential rents and super-rich tycoons, as they try to cool the overheated property market.

A study by US consultancy Demographia last month found Hong Kong's home prices were the least-affordable in the world.

"We are determined to maintain the stable and healthy development of the property market," Tsang said in his annual budget speech, adding that the government would hold a series of land auctions this year to boost supply.

"The challenges in the coming year arise mainly from the risk of asset-price bubbles and inflation... Fighting inflation is our major task this year."

Tsang said strong growth in mainland China and Asia helped Hong Kong's economy bounce back from the global financial crisis "at a faster pace than expected" last year, growing 6.8 percent. The city's economy was expected to grow as much as 5.0 percent this year.

However, consumer prices grew 2.5 percent in 2010 and Tsang warned the inflation rate would surge to 4.5 percent this year.

He also said "excessive" fund flows into Hong Kong had sparked "exuberant speculative activities" that could push up already buoyant property prices.

Tsang's measures to soften the impact of rising prices included an electricity subsidy for city residents and temporary government-funded rent payments for public housing tenants.

Hong Kong would continue to study placing some public facilities, such as sewage treatment plants, in underground rock caverns and reclaiming land from the sea to tackle the densely populated city's land-shortage problem, he added.

Wong Leung-sing, associate director of realtor Centaline, estimated property prices would rise 15 percent this year and said the budget did not go far enough in tackling the "most immediate problem which is inflation."

However Buggle Lau, chief analyst at property firm Midland Holdings, backed the new measures as a way to bring down house prices.

"It's simple economics -- lower demand and higher supply will bring prices down," he told AFP, but added that "some factors are out of (the government's) control like ultra-low interest rates."

Authorities have already announced a series of measures to stem rising home costs, including multiple land sales and tighter mortgage lending rules, but they have failed to stem surging land prices.

That has sparked public anger in Hong Kong, a city traditionally associated with laissez-faire economic policies, and a warning from the International Monetary Fund of a potential bubble.

A limping economic recovery in the West and Europe's sovereign debt crisis would blur Hong Kong's economic prospects in 2011, Tsang said Wednesday.

"The relatively fragile economic recovery of the US and Europe will make this year a testing time for the export performance of Asia and Hong Kong," he added.

Renegade lawmaker Leung Kwok-hung was ejected from the legislative chamber Wednesday after loudly interrupting Tsang's speech and throwing several items at him, including bitter melon to show his distaste for government policies.

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