The larger block, at 5216sqm, was passed in at $9 million. The highest bidder was Amalgamated Property Group principal Graham Potts.

The smaller site, 3681sqm, was passed in at $7 million. Its highest bidder was Jure Domazet, representing the Doma Group.

Mr Domazet said Doma wanted to develop residences on the site.

Each site had an undisclosed reserve price.

The land was marketed as ''the best residential development sites in Canberra'', positioned between the boat harbour and Lake Burley Griffin, offering waterfront living close to Kingston's shops and restaurants.

CBR Richard Ellis agent Nick McDonald Crowley, who conducted the auction, did his best to start the bidding in the Members Dining Room at Old Parliament House.

''It is the finest development opportunity in Canberra real estate,'' he told the crowd.

The under-bidder for both blocks was Anthony Tokich, representing Per-Se Developments. He said his company would have put in a mixed-use residential/commercial project.

Mr Tokich reflected other views expressed at the auction that the unique nature of the sites might create extra costs for developers

''It's sitting on the lake, it's a man-made island, it potentially has fill issues associated with it, and waterproofing of the basement, which leads to increased construction costs,'' he said.

He said he wasn't disappointed, dipping out of the auction at $8.9million and $6.9million for the blocks. ''Timing wouldn't let me go any higher. We've got a lot of work coming up in the next three years,'' he said.

Chief Minister Jon Stanhope expected a positive outcome from discussions with the developers.

''If these negotiations are successful, I have been advised that the ACT community can expect quality developments to match the high-profile location and the ACT community's expectations for Kingston Foreshore,'' he said.