HONG KONG--Hong Kong's government said Friday it would further increase land supply to avoid a property bubble, warning that prices of some flats are approaching historic highs.

John Tsang, the city's financial secretary, said prices in June were eight percent up from the end of 2009, despite a series of measures the government introduced in April to cool the overheating market.

"A large amount of hot money has flown into Hong Kong's financial system. Flat prices of some popular housing developments are fast approaching historic highs," he told a press conference.

"There is an increased risk of a property bubble forming because interest rates are expected to continue to be very low for some time to come," he said.

Tsang said the government would auction three extra sites on its latest application list in the remainder of the fiscal year ending March 2011, regardless of whether developers table an offer.

Two of these three sites would be auctioned in September.

Under Hong Kong's application list system, a land auction is triggered only when a developer offers at least 80 percent of the government's minimum price for a lot on the list.

Tsang added the government would also convert some industrial sites into residential sites.

The city's home prices have surged nearly 45 percent from its trough in end-2008, supported by persistently low interest rates.