(Bloomberg) -- Tung Chee-hwa, Hong Kong's first leader after the city's return to Chinese rule, blamed soaring property prices on a lack of land supply and highlighted the social divisions caused by rising housing costs.
The 80-year-old veteran of Hong Kong and Chinese politics, who himself struggled with a housing boom that turned to bust, indicated his concern in a Bloomberg TV interview, as the city marks the 20th anniversary of its handover from Britain to China.
In the past eight to 10 years, “we didn't provide enough land for housing, so the property prices went up very, very rapidly,” said Tung, who was chief executive from 1997 to 2005. “All these things create a divide, much deeper divide between the rich and the poor. The shrinkage of the middle class appeared. These are the real challenges we in Hong Kong are facing.”
As housing prices keep surging to new records despite government measures to cool the market, Financial Secretary Paul Chan has warned that the city is in a “dangerous situation," adding his voice to analysts and officials cautioning that a price slump may be on the way.
A limited supply of new homes has triggered debates over using reclaimed land or parts of country parks for housing, with incoming Chief Executive Carrie Lam planning a task force on how to free up more land.
Stories on the city's struggle with housing include:
- Ready for a Tesla-Sized Apartment? In Hong Kong, It's $500K
- Ghost of '97 Stalks Economy Infected by Housing Debt
- Prison-Cell Flats Show Limits of Home-Supply Policy
Back in 1997, Tung had his own plan to provide 85,000 housing units annually and reach 70 per cent home ownership in the 10 years after the handover. But that initiative was aborted after the Asian financial crisis kicked off a 70 percent collapse in Hong Kong's home prices, driving an estimated 100,000 home owners into negative equity. Critics alleged that Tung's plan had only exacerbated the slump.
Tung resigned in March 2005, citing his health, after mass protests in 2003 against planned anti-subversion legislation, and he is now vice chairman of the Chinese People's Political Consultative Conference.
Looking at Hong Kong, Tung is concerned at limited job prospects for the young, as some mainland cities like Shenzhen and Shanghai surge ahead. While the city's unemployment rate is “unbelievably” low, not enough jobs are “high-end,” he said. “So, how do you try to overcome this? Build the economic pie bigger and more attractive for high-end jobs for our young people."
--With assistance from Fion Li
To contact the reporters on this story: Ting Shi in Hong Kong at tshi31@bloomberg.net, Betty Liu in New York at bliu17@bloomberg.net.
To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net, Paul Panckhurst
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