Macarthur House will be the final site to be sold off by the Barr government as part of the Commonwealth's asset recycling scheme, in which the government received bonuses for selling off old buildings.

Proceeds from the sale of the site and the Commonwealth bonus will help fund the light rail project, which runs past the Northbourne Avenue block. The site is also flagged to become an "urban village" aimed at bringing density and life to the light rail stop near the intersection of Northbourne and Macarthur Avenues. 

Above-ground demolition of the former public service office block will be finished next week, the ACT's new urban renewal minister Rachel Stephen-Smith said, with the site to be fully razed by the end of the year.

"It's a great example of the progress we're making with the asset recycling initiative," Ms Stephen-Smith said.

She said the site was a critical part of the urban renewal of the inner north of Canberra.

"Obviously residents of the inner north are going to be watching very closely what is going to be developed on this site and we're going to be talking to the market about what people are looking to put on this site, but it's going to be really important that it's an excellent design that fits in with the community's needs and certainly there'll be an opportunity for the community to have their say on what it looks like," she said.

It's likely the community will have a lot to say after the site hits the market next year.

It's one of four corner blocks on that intersection that will be rezoned to allow buildings up to 48 metres high - including the ABC's Dickson offices - with surrounding blocks zoned for mixed-use.

The plan to lift building heights along the light rail route was revealed in March, aimed at allowing an extra 37,000 dwellings to be built on prime land in the inner north - about 75 years' worth of supply.

Earlier the government tried to hose down reports it was planning to allow towers at the Macarthur Avenue intersection to rise up to 50 metres.

The ACT government's public housing flats along the Northbourne corridor were also sold off to cash in on the asset recycling bonus and increase density on the light rail route. The last two major public housing blocks hit the market in June. 

The light rail construction has also prompted the Canberra Racing board to consider redeveloping part of Thoroughbred Park in Lyneham to shore up their long-term financial future. 

And while the Macarthur House site was part of the asset recycling initiative, valuable land is not the only thing that has been reclaimed through the process.

"This project will see about 15 tonnes of material recycled; everything from the concrete and steel right through to the trees and shrubs," Ms Stephen-Smith said.

"As much is being recycled and reused as possible on this site which is a real demonstration of cutting-edge demolition work."