The 2902sqm block on Canberra Avenue, across from the Kingston Hotel, is used as an informal car park but has approval for commercial and residential development.

Kingston Hotel owner Steve Dawn did not want to comment on the sale.

But Colliers International ACT chief executive Paul Powderly said he expected a local developer to snap up the block for $8-9 million.

''As part of the redevelopment you have to reinstate 60 car spaces. The site has controls on maximum building heights, but someone could end up with something like 80 to 90 residential units and some commercial space,'' Mr Powderly said.

He said tough lending practices from banks would damp bids.

''It's a lot of money at the moment because you can't get banks to lend much. There is interest but it's not strong; people are just sort of standing back and having a look with respect to banking and other auctions,'' he said. Raine and Horne Commercial will run the auction.

Agent Mark Terracini said about 50 people had shown interest in the site. ''There has been strong interest from local and interstate developers ... I would think we are going to have about 15 registered bidders.''

A 2142sqm block in Belconnen approved as a mixed-use commercial and residential site will also be auctioned this morning. Mr Terracini would not comment on the properties' reserve prices. But a 7542sqm commercial site sold in Forrest for $11.3 million in June.

Mr Powderly said the Land Development Agency would hold more auctions next week. ''The next one is at Kingston foreshore on the water. So people are not going to pay over the top and get carried away.''